Indicate whether each of the following items regarding petty cash is true or false. ________ a) The establishment of a petty cash fund is an asset use transaction.________ b) The replenishment of a petty cash fund is an asset source transaction.________ c) At any time, the total of the petty cash vouchers plus the remaining coins and currency should equal the balance of the Petty Cash ledger account.________ d) If a shortage occurs, the Cash Short and Over account is credited.________ e) There is no journal entry made in the accounting records when petty cash funds are disbursed.
What will be an ideal response?
a) F b) F c) T d) F e) T
a) This is false. Establishment of a petty cash fund increases one asset (petty cash) and decreases another asset (cash), so it is an asset exchange transaction.
b) This is false. Replenishment of a petty cash fund is an asset use transaction that increases expenses and decreases cash.
c) This is true. The total of the petty cash vouchers plus the cash on hand should equal the balance in the petty cash account.
d) This is false. A shortage of cash results in a debit entry to the Cash Short and Over account.
e) This is true. No journal entry is made in the accounting records when petty cash funds are disbursed. The effects on the financial statements are recorded only when the petty cash fund is replenished or increased (when additional currency is put into the petty cash safety box).
You might also like to view...
What are the major differences between a basic technology purchasing system and an integrated purchases processing system?
A negative NPV for an option indicates that the option will lose money for the supply chain
Indicate whether the statement is true or false.
Kimberly has opened an account in Northwater City Bank. She receives a 3.5 percent interest rate on the money she deposits in her account. She does not use the funds from the account to meet her minor expenditures but only uses them when there is any major expenditure. In the context of this scenario, which of the following kinds of bank accounts does Kimberly hold?
A. A concentration account B. A basic checking account C. A fixed deposit account D. A savings account
When a company purchases supplies on account
A. Cash flow from financing activities decreases B. Expenses increase C. Liabilities increase D. Total assets decrease