Multiple Choice
Which term best describes an amount of cash kept on hand and used for making small payments?
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6. Internal Controls and Reporting Cash
Petty Cash
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Replenishing the petty cash fund requires:
A
Increasing the petty cash fund balance by depositing additional cash.
B
Recording expenses and issuing a check for the amount spent to restore the fund to its original balance.
C
Transferring unused petty cash to the company's main bank account.
D
Recording only the cash overages and shortages without issuing any check.
Verified step by step guidance1
Understand the purpose of replenishing the petty cash fund: It is to restore the fund to its original balance by accounting for expenses incurred and ensuring the fund is ready for future use.
Identify the expenses paid using petty cash: Gather receipts or documentation for all expenses made from the petty cash fund during the period.
Record the expenses in the accounting system: Create journal entries to debit the appropriate expense accounts (e.g., office supplies, travel expenses) and credit the petty cash account for the amount spent.
Issue a check to replenish the petty cash fund: Write a check from the company's main bank account for the total amount spent, ensuring the petty cash fund is restored to its original balance.
Verify the petty cash fund balance: Confirm that the replenishment process has restored the petty cash fund to its original balance, accounting for any overages or shortages if applicable.
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Master Petty Cash:Establishing the Fund and Using the Fund with a bite sized video explanation from Brian
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