Question

Palmona Co. establishes a $300 petty cash fund on January 1. On January 8, the fund shows $197 in cash along with receipts for the following expenditures: postage, $43; transportation-in, $13; delivery expenses, $15; and miscellaneous expenses, $32. Palmona uses the perpetual system in accounting for merchandise inventory.

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 $350 on January 8, assuming no entry in part 2. (Hint: Make two separate entries for part 3.)

Answer 1

	Journal entries:
Part 1	Date	Accounts title and explanations				Debit $	Credit $
	1-Jan	Petty cashh				300
		Cash account					300
Part -2	8-Jan	Postage expenses				43
		Merchandise inventory				13
		Delivery expensses				15
		Misc expenses				32
		Cash account					103
Part -3	8-Jan	Postage expenses				43
		Merchandise inventory				13
		Delivery expensses				15
		Misc expenses				32
		Cash account					103
	8-Jan	Petty Cash account				50
		Cash account					50