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

Why is the Cash account, rather than the Petty Cash account, credited when a petty cash fund is replenished?

Because replenishing the petty cash fund decreases the company's cash on hand, not the established petty cash balance.

Because the petty cash account is only used to record expenses, not cash movements.

Because the petty cash fund is closed and re-established each time it is replenished.

Because replenishing the fund increases the petty cash account balance.

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Verified step by step guidance

Understand the purpose of the petty cash account: The petty cash account is used to record small, routine expenses incurred by the company. It is not used to track cash movements directly.

Recognize the nature of replenishing the petty cash fund: When the petty cash fund is replenished, the company is transferring cash from its main Cash account to the petty cash fund to restore its balance.

Identify the impact on the Cash account: Replenishing the petty cash fund decreases the company's cash on hand, which is recorded in the Cash account. Therefore, the Cash account is credited to reflect this reduction.

Clarify why the Petty Cash account is not credited: The Petty Cash account represents the established balance of the petty cash fund, which remains constant unless the fund size is formally changed. Replenishing the fund does not affect this balance.

Conclude the reasoning: The replenishment process involves recording expenses paid out of the petty cash fund and crediting the Cash account to reflect the transfer of funds, while the Petty Cash account remains unchanged.