WorksheetsUnderstanding Petty Cash Management
Total questions: 10
Worksheet time: 5mins
What is the definition of petty cash?
Petty cash is a small amount of cash kept for minor expenses.
A large sum of money for major investments.
A type of bank account for savings.
A method of tracking employee salaries.
What is the primary purpose of maintaining a petty cash fund?
To invest in long-term assets.
To pay employee salaries.
To cover large project expenses.
To manage small, incidental expenses.
List three common petty cash transactions.
Marketing campaign expense
Utility bill payment
Office furniture purchase
1. Office supplies purchase, 2. Postage payment, 3. Employee travel reimbursement
How are petty cash transactions recorded in the books?
Petty cash transactions are recorded by creating a separate revenue account for each transaction.
Petty cash transactions are recorded by crediting the petty cash account and debiting the bank account.
Petty cash transactions are recorded by debiting the petty cash account and crediting the relevant expense accounts as cash is spent.
Petty cash transactions are recorded by only debiting the expense accounts.
What is the process of reconciling a petty cash book?
Ignoring discrepancies in the records
The process of reconciling a petty cash book involves comparing receipts with the cash balance, identifying discrepancies, and updating records.
Only updating the cash balance
Counting the total cash without receipts
Why is it important to keep track of petty cash expenses?
To avoid having to report any expenses to management.
It is important to keep track of petty cash expenses to maintain accurate financial records and prevent fraud.
To simplify the process of making large purchases.
To increase the amount of cash available for personal use.
What are the typical sources of petty cash funds?
Sales revenue from product sales
Donations from customers
Main cash reserves, budget allocations, cash advances from finance department
Interest earned on savings accounts
How often should petty cash be replenished?
Only when the cash is completely depleted.
Monthly or when the balance is low.
Annually regardless of the balance.
Weekly or when the balance is high.
What documentation is required for petty cash transactions?
Expense report and invoice
Bank statement and ledger
Petty cash voucher, receipts, and reconciliation report.
Purchase order and delivery note
What are the potential risks of not managing petty cash properly?
Enhanced customer satisfaction
Improved financial forecasting
Risks include misappropriation of funds, inaccurate records, fraud, and loss of accountability.
Increased employee morale
