Question

Palmona Co. establishes a $200 petty cash fund on January 1. On January 8, the fund shows $97 in cash along with receipts for the following expenditures: postage, $44; transportation-in, $12; delivery expenses, $14; and miscellaneous expenses, $33. Palmona uses the perpetual system in accounting for merchandise inventory.
Required:
1. Prepare journal entries to (1) establish the fund on January 1, (2) reimburse it on January 8, and (3) both reimburse the fund and increase it to $250 on January 8, assuming no entry in part 2. Hint: Make two separate entries for part 3.

Answer 1

Answer:

The journal entries are as follows:

(i) On January 1,

Petty cash A/c Dr.  $200

    To cash A/c              $200

(To record the fund)

(ii) On January 8,

Postage A/c Dr. $44

Transportation-in A/c Dr. $12

Delivery expenses A/c Dr. $14

Miscellaneous expenses A/c Dr. $33

               To cash                                 $103

(To record the reimburse expenses)

(iii) On January 8,

Petty cash A/c Dr.  $50

    To cash A/c              $50

(To record the increases petty cash fund)