Question

Palmona Co. establishes a $200 petty cash fund on January 1. On January 8, the fund shows $38 in cash along with receipts for the following expenditures: postage, $74; transportation-in, $29; delivery expenses, $16; and miscellaneous expenses, $43. Palmona uses the perpetual system in accounting for merchandise inventory.Prepare journal entries to establish the fund on January 1.

Answer 1

Date Explanation Debit Credit

January 1 Petty Cash $200

Cash $200

Step-by-step explanation:

Step 1: Journal Entries to Establish the Fund on January 1

Date Explanation Debit Credit

January 1 Petty Cash $200

Cash $200

Being the establishment of petty cash fund

Step 2: Preparing Journal Entries to reimburse funds on January 8

Date Explanation Debit Credit

January 8 Postage $74

Transportation $29

Delivery $16

Miscellaneous $43

Cash $162

Being the reimbursement of Petty Cash Fund.

Petty Cash is usually a fund established by an organisation to take care of day to day expenses. At the end of a period or at the exhaustion of the fund, an account is given and then the amount spent is reimbursed.