Which one of the following procedures is incorrect for setting up and maintaining a petty cash fund? A) A check is prepared for a fixed amount; when the check is cashed, the money is entrusted to a petty cash custodian. B) An entry is recorded to establish the fund and obtain the cash. C) When appropriate documentation is presented, cash payments are made from the fund; the petty cash custodian retains the documentation. D) When the petty cash fund is replenished, an entry is recorded to recognize an increase in the petty cash account.

Question

Quizplus · Accepted Answer

The incorrect procedure for setting up and maintaining a petty cash fund is recognizing an increase in the petty cash account when the fund is replenished. Instead, expenses are recorded based on the documentation retained by the petty cash custodian, and the petty cash account balance remains constant.

Which One of the Following Procedures Is incorrect for Setting