Which 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)A journal 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,a journal entry is recorded to recognize an increase in the petty cash account.

Question

Quizplus · Accepted Answer

The journal entry to replenish the petty cash fund should record a decrease in the petty cash account, not an increase. This is because the fund is being reimbursed for cash disbursements that have already been made, resulting in a decrease in the amount of cash on hand. The correct journal entry would be to debit the various expense accounts for the cash disbursements and credit the petty cash account for the total amount, resulting in a decrease of the petty cash account.

Which of the Following Procedures Is Incorrect for Setting Up