Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Petty Cash

Financial Accounting

6. Internal Controls and Reporting Cash

Petty Cash

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Multiple Choice

Which of the following procedures is typically used when a petty cash fund is established?

A check is written to the custodian for the amount of the fund, and the custodian is responsible for disbursing cash and maintaining receipts.

The petty cash fund is replenished only at the end of the fiscal year.

Cash is withdrawn from the company's bank account each time a petty cash expense occurs.

Petty cash expenses are recorded directly in the general ledger as they occur, without maintaining a separate fund.

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Verified step by step guidance

Understand the concept of a petty cash fund: A petty cash fund is a small amount of cash kept on hand to cover minor expenses that are impractical to pay by check or electronic transfer. It is managed by a custodian who is responsible for disbursing cash and maintaining receipts.

Review the typical procedure for establishing a petty cash fund: When a petty cash fund is established, a check is written to the custodian for the amount of the fund. This ensures proper documentation and accountability for the initial setup.

Clarify the role of the custodian: The custodian is responsible for disbursing cash for small expenses and maintaining receipts for all transactions. These receipts are used to reconcile the fund periodically.

Understand the replenishment process: The petty cash fund is replenished periodically, typically when the fund is low or at the end of a reporting period, not necessarily at the end of the fiscal year. Replenishment involves writing a check to restore the fund to its original balance based on the receipts provided.

Differentiate incorrect procedures: Cash is not withdrawn from the company's bank account each time a petty cash expense occurs, nor are petty cash expenses recorded directly in the general ledger as they occur. Instead, expenses are recorded when the fund is replenished, ensuring proper tracking and reconciliation.