Understanding Petty Cash Management

What is the primary purpose of a petty cash fund in an organization?

• To pay employee salaries

• To cover small, incidental expenses

• To invest in stocks

• To purchase fixed assets

Which of the following is typically NOT paid from petty cash?

• Office supplies under $20

• Employee travel advances

• Utility bills for the entire office

• Reimbursement for minor postage

Who is usually responsible for managing the petty cash fund?

• The company’s CEO

• The petty cash custodian

• The board of directors

• The external auditor

What document is typically used to record each transaction made from the petty cash fund?

• Petty cash voucher

• Bank statement

• Invoice

• Balance sheet

• Add $35 to the fund

• Add $70 to the fund

• Add $65 to the fund

• Add $100 to the fund

A company’s petty cash fund is frequently running short before the end of the month. What is the most appropriate action to take?

• Ignore the issue

• Increase the petty cash fund limit

• Decrease the petty cash fund limit

• Eliminate the petty cash fund

Which of the following best describes the process of replenishing the petty cash fund?

• Depositing cash into the company’s main bank account

• Writing a check equal to the total of all vouchers and restoring the fund to its original amount

• Withdrawing all cash from the fund

• Transferring funds to employee accounts

Suppose you are the petty cash custodian and you notice a recurring pattern of missing receipts for certain types of expenses. What steps should you take to address this issue?

• Ignore the missing receipts

• Require all employees to submit receipts and implement stricter controls

• Reduce the petty cash fund

• Eliminate petty cash usage for those expenses

When replenishing the petty cash fund, which of the following journal entries is correct if $80 in expenses have been paid out and the fund is being restored to its original balance?