Question

Palmona Co. establishes a $310 petty cash fund on January 1. On January 8, the fund shows $217 in cash along with receipts for the following expenditures: postage, $38; transportation-in, $13; delivery expenses, $15; and miscellaneous expenses, $27. Palmona uses the perpetual system in accounting for merchandise inventory.
Prepare journal entry to establish the fund on January 1, reimburse it on January 8, and reimburse the fund and increase it to $330 on January 8, assuming no entry in part 2

Answer 1

Answer:

The answer and procedures of the exercise are attached in the following archives.

Explanation:

The first part of the journal entry would record the expenses as the receipt. Hence the expense account would be a debit. A corresponding entry would be a credit to the cash account to record the receipt of such expenses. This is done basis the basic accounting rule that increase in the asset and expense account signifies as debit and vice versa whereas increase in the liability and revenue account would be regarded as the credit.

The second journal entry would increase the petty cash account by $50 to raise the balance of existing petty cash from $280 to $330. A corresponding effect would be a credit to the cash account.