Which of the following statements is true?
A)Good cash management practices dictate that a company should maintain as large a balance as possible in its Cash account.
B)Sound internal control practice dictates that all cash payments should be made by check.
C)The person handling the cash should also prepare the bank reconciliation.
D)Petty cash can be substituted for a checking account to expedite the payment of all disbursements.

Question

Quizplus · Accepted Answer

Sound internal control practice dictates that all cash payments should be made by check to maintain proper documentation and prevent theft or fraud. A large balance in the cash account (A) is not necessary and can be detrimental to investment opportunities. The person handling cash should not prepare the bank reconciliation (C) to maintain separation of duties. Petty cash (D) is meant for small expenses and should not be used to substitute a checking account for all disbursements.

Which of the Following Statements Is True