Reference no: EM132574393

R. & Company allows customers to use debit and bank credit cards and cash for purchases of merchandise. The company does not accept personal cheques from customers. Ramesh's bank charges $1.05 for every debit card transaction and 4% for credit card transactions.

On May 1, the company established a petty cash fund. Before it created the petty cash fund, cash was taken from the cash register whenever someone needed cash to pay for a small expense.

The following transactions happened in the first two weeks of May:

May 1 Established the petty cash fund by cashing a cheque for $250.

8. Total sales for the week were $35,000. Eustomers paid for these purchases as follows: $12,012 in cash, $3,558 on debit cards (122 transactions) and the balance using bank credit cards.

8 Replenished the petty cash fund. On this date, the fund consisted of$75 in cash and the following petty cash receipts:

Delivery of merchandise to customers $50

Postage 30

Advertising in local paper 40

Of?ce expense 49

15 Total sales for the week were $15,380. Customers paid for these purchases as follows: $3,590 in cash, 7,390 on debit cards {85 transactions},and the balance using bank credit cards.

15 Replenished the petty cash fund and increased the balance to $300. On this date, the fund consisted of $55 in cash and the following petty cash receipts:

Ramesh's personal withdrawal $08

Supplies 36

Delivery of merchandise to customers 50

Instructions

Question a. Record the transactions. Round to the nearest dollar.

Question b. What are the advantages and disadvantages of accepting debit and bank credit card transactions as opposed to accepting only cash and personal cheques from customers? Consider both the internal control and business reasons.

Taking It Further

What are the benefits of having a petty cash fund instead of paying small expenses from the cash register receipts? What policies and procedures should R. & Company follow to ensure there is good internal control over its petty cash fund?