can someone please explain how this works, and how you know which account to use

Question

can someone please explain how this works, and how you know which account to use?
(sorry my notes are messy, i was trying to get them from the board)

Problem 7-3 The Lee Legal Services Firm established a petty cash account on January 2, in the amount of $250. A month end examination of the account revealed a balance of $10.50 and the following receipts: office supplies $59.18, postage expense $150.32 and miscellaneous expense $30.00. The account is to be replenished on February1 Required: 1) Prepare the January 2, entry to establish the account. 2) Prepare the February 1 entry to replenish the fund. 3) Suppose the amount of cash remaining in the fund was S9.50, give the entry to 4) Suppose the amount of cash remaining in the fund was $11.50, give the entry to 5) Suppose the comptroller decided to increase the size of the fund to $300 on 6) Suppose the comptroller decided to decrease the fund to $200 on February 1. replenish the fund. replenish the fund. February 1. In one compound entry replenish, as well as, increase the fund using the original information. In one compound entry replenish, as well as, decrease the fund using the original derrto ciccn information.ctdit t Problem 7-4 urt Associates hired a new comptroller on Jan. 2. This comptroller believed in a sse faire form of management and decided to relax the financial procedures and simply espect the financial employees to be trustworthy professionals. h receints and maintain

Explanation / Answer

Petty cash being an asset account is debited when increased and credited when decreased. The receipts are recorded to the respective accounts to which they pertain such as postage expense, miscellaneous expense, etc. At the time of every replenishment, the receipts are recorded and the amount replenished from cash so that the petty cash fund balance is maintained at the amount for which it is established. Any shortage in cash (total of receipts and physical count of petty cash) if less than the established petty cash limit, is debited to the cash short or over account and any excess is credited to the same account.

Date Account Title Debit Credit 1 Jan. 2 Petty Cash 250.00 Cash 250.00 (To record establishment of petty cash fund) 2 Feb. 1 Office supplies 59.18 Postage expenses 150.32 Miscellaneous expense 30.00 Cash 239.50 (To record replenishment of petty cash fund) 3 Feb. 1 Office supplies 59.18 Postage expenses 150.32 Miscellaneous expense 30.00 Cash short or over 1.00 Cash 240.50 (To record replenishment of petty cash fund) 4 Feb. 1 Office supplies 59.18 Postage expenses 150.32 Miscellaneous expense 30.00 Cash short or over 1.00 Cash 238.50 (To record replenishment of petty cash fund) 5 Feb. 1 Office supplies 59.18 Postage expenses 150.32 Miscellaneous expense 30.00 Petty Cash 50.00 Cash 289.50 (To record replenishment and increase in petty cash fund) 6 Feb. 1 Office supplies 59.18 Postage expenses 150.32 Miscellaneous expense 30.00 Petty Cash 50.00 Cash 189.50 (To record replenishment and decrease in petty cash fund)

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