The entry to establish the petty cash fund was not completed. This would cause
A) cash to be understated.
B) cash to be overstated.
C) assets to be understated.
D) assets to be overstated.

Question

Quizplus · Accepted Answer

CWhen the entry to establish the petty cash fund is not completed, cash is not reduced to reflect the allocation to petty cash, leading to an overstatement of cash. Since petty cash is part of a company's assets, not recording it separately means total assets are understated because the allocation is not recognized in the petty cash account.

The Entry to Establish the Petty Cash Fund Was Not