Accounting: 9-3 Managing Petty Cash

What is the origin of the word 'petty' in 'petty cash'?

• Derived from the German word 'petit', meaning insignificant

• Derived from the French word 'petit', meaning small or little

• Derived from the Spanish word 'pequeño', meaning tiny

• Derived from the Latin word 'petitus', meaning small

What is the typical range of a petty cash fund?

• $20-$400

• $100-$500

• $50-$300

• $10-$200

Who is responsible for managing a petty cash fund?

• The company CEO

• The petty cash custodian

• The head of finance

• The external auditor

How is petty cash classified in the general ledger?

• Liability

• Expense

• Equity

• Asset

What is the initial journal entry to establish a petty cash fund?

• Debit Petty Cash, credit Cash

• Debit Expenses, credit Petty Cash

• Debit Cash, credit Petty Cash

• Debit Petty Cash, credit Expenses

How are petty cash transactions usually recorded?

• They are not recorded

• In a ledger after each transaction

• On a petty cash report in bulk

• Directly in the general ledger

What must be done if there is a discrepancy between the petty cash report balance and the actual cash count?

• Ignore the discrepancy

• Record the difference in an expense account called Cash Short and Over

• Immediately replenish the fund to match the report

• Report the discrepancy to the police

What is the final step in reconciling and replenishing the petty cash fund?

• Journalize the transactions and replenishment

• Appoint a new custodian

• Increase the fund size

• Close the petty cash account

What happens if the petty cash fund is not replenished to its starting balance?

• Debit Petty Cash, credit Cash

• Credit Petty Cash, debit Cash

• A penalty is applied

• The fund is automatically closed

Which accounts are debited to reflect petty cash expenses?

• Accounts Payable, Accounts Receivable

• Petty Cash, Cash Short and Over

• Cash, Cash Short and Over

• Travel Expense, Supplies Expense, and Miscellaneous Expense