Question 1

The journal entry to open a new petty cash fund includes a debit to the Petty Cash account and a credit to the Cash account.

Accepted Answer

This is correct, as the journal entry to establish a petty cash fund involves debiting the Petty Cash account (to increase its balance) and crediting the Cash account (to reduce its balance as cash is transferred out of it).

Question 2

The petty cash fund had an initial imprest balance of $220.It currently has $18 in cash,$5 in miscellaneous petty cash tickets,and an additional $191 in specific petty cash tickets.The debit to Cash Short & Over would be ________.

Accepted Answer

A) Cash Short & Over = $220 - $18 - $5 - $191 = $6 short

Question 3

All petty cash fund payments should be supported with sequentially numbered petty cash tickets.

Accepted Answer

Petty cash payments should be supported with sequentially numbered petty cash tickets to ensure proper documentation and tracking of the transactions in the petty cash fund. This helps to prevent fraud or misuse of the funds and provides accountability for all expenditures made from the fund.

Question 4

The journal entry to replenish a petty cash fund includes a debit to the Petty Cash account and a credit to the proper expense account(s).

Accepted Answer

The journal entry to replenish a petty cash fund actually includes a debit to the appropriate expense account(s) and a credit to Cash (not a debit to the Petty Cash account), reflecting the expenses paid out of petty cash.

Question 5

Which of the following would be included in the entry to record the replenishment of a petty cash fund?

Accepted Answer

The replenishment of a petty cash fund involves adding money to the fund to bring it back up to the original balance. The entry to record this transaction would involve debiting the appropriate expense accounts for the transactions that were paid for from the petty cash fund and crediting the cash account for the amount being added. Therefore, the correct answer is a credit to Cash.

Question 6

When replenishing the petty cash fund,the company debits either the associated expense incurred or the asset purchased with the fund.

Accepted Answer

When replenishing the petty cash fund, the company debits either the associated expense incurred or the asset purchased with the fund to increase the balance in the petty cash account. This is because the petty cash fund is considered an asset of the company, and any expenses or purchases made from the fund must be recorded in the accounting system. By debiting the appropriate account, the company can accurately track the use of the petty cash fund and ensure that it is properly replenished.

Question 7

An imprest system is a way to account for petty cash by maintaining a constant balance in the petty cash account.

Accepted Answer

An imprest system is a method of keeping a fixed amount of money in a petty cash account, which is replenished as needed to keep the balance at the predetermined level. This system helps to ensure that accurate records are maintained and that there is no opportunity for misappropriation of funds.

Question 8

Which is the most liquid form of asset?

Accepted Answer

Cash is the most liquid form of asset as it can be easily and quickly converted into other forms of assets or used to pay off liabilities. Accounts receivable, inventory, and supplies may take longer to convert into cash and are less liquid.

Question 9

Which of the following is NOT an internal control over the petty cash fund?

Accepted Answer

Having two custodians assigned to the petty cash fund is an internal control measure. All other options listed (A, B, and C) are also internal control measures commonly used for managing a petty cash fund.

Question 10

A petty cash fund was established with a $400 balance.It currently has cash of $43 and petty cash tickets totaling $357.Which of the following would be included in the entry to replenish the fund?

Accepted Answer

D) Calculations: $400 - $43 = $357

Question 11

When replenishing the petty cash fund,the company debits the Petty Cash account and credits the Cash account.

Accepted Answer

When replenishing the petty cash fund, the company debits either the associated expense incurred or the asset purchased with the fund.

Question 12

A petty cash fund was established with a $600 balance.It currently has cash of $19 and petty cash tickets as shown below: $$\begin{array} { | l | r | } 
\hline \text { Travel expense } & \$ 100 \
\hline \text { Office supplies expense } & 285 \
\hline \text { Equipment rental expense } & 78 \
\hline
\end{array}$$ Which of the following would be included in the journal entry to replenish the Petty Cash fund?

Accepted Answer

CTo replenish the petty cash fund, the total expenses recorded in petty cash tickets must be added up and compared to the difference between the original fund balance and the current cash on hand. The expenses are $100 (Travel expense) + $285 (Office supplies expense) + $78 (Equipment rental expense) = $463. The original balance was $600, and the current cash on hand is $19, so $600 - $19 = $581 should have been spent according to the cash on hand and the original balance. However, the tickets only account for $463 of expenses. This means there is a discrepancy of $581 - $463 = $118. This discrepancy is accounted for by debiting Cash Short & Over for the missing amount ($118), indicating a shortage. The Petty Cash account is not directly affected in the replenishment process; instead, specific expense accounts are debited for the amounts on the tickets, and Cash (not Petty Cash) is credited for the total replenishment amount. However, in this question, the correct understanding involves recognizing the discrepancy and how it is accounted for, which is why A is correct for acknowledging the shortage. C is included as a correct choice based on the question's structure, but it should be noted that typically, in practice, Petty Cash is not debited in the replenishment process; specific expense accounts are. This might be a misunderstanding in the question's construction.

Question 13

For each petty cash payment,the custodian prepares a petty cash ticket.

Accepted Answer

Petty cash tickets are prepared by the custodian for each petty cash payment to keep track of the expenses and to document the cash disbursement.

Question 14

A company has a petty cash fund amount of $300.When replenished,it has petty cash tickets of $30 for gas expense,$33 for postage expense,$16 for supplies expense,and $12 for miscellaneous expenses.Assume the cash balance is not over or short.In the journal entry,Cash would be credited for ________.

Accepted Answer

A) Amount of cash spent = $30 + $33 + $16 + $12 = $91

Question 15

The imprest system requires that the petty cash box contain cash and petty cash tickets that total the amount of the imprest balance only at the end of each month.

Accepted Answer

The imprest system requires that, at any point in time, the petty cash box contains cash and petty cash tickets that total the amount of the imprest balance.

Question 16

A petty cash fund was established with a $400 balance.It currently has cash of $41 and petty cash tickets totaling $359.Which of the following would be included in the entry to replenish the fund?

Accepted Answer

D) Calculations: $400 - $41 = $359

Question 17

A petty cash fund was established with a $525 balance.It currently has cash of $35 and petty cash tickets as shown below: $$\begin{array} { | l | r } 
\hline \text { Travel expense } & \$ 105 \
\hline \text { Office supplies expense } & 250 \
\hline \text { Equipment rental expense } & 100 \
\hline
\end{array}$$ Which of the following would be included in the journal entry to replenish the Petty Cash fund?

Accepted Answer

BThe total of the petty cash tickets is $455 ($105 for travel expense, $250 for office supplies expense, and $100 for equipment rental expense), and the current cash on hand is $35. The original balance of the petty cash fund was $525. To replenish the fund back to its original balance, you would need to add $490 ($525 original balance - $35 current cash). The difference between the total of the tickets ($455) and the amount needed to replenish ($490) is $35, which indicates a shortage. Therefore, you debit Cash Short & Over for the shortage ($35) and credit Cash or Cash in Bank for the replenishment amount ($490), not directly affecting the Petty Cash account in the replenishment process.

Question 18

A way to account for petty cash by maintaining a constant balance in the petty cash account and which at any time requires that cash plus petty cash tickets must total the amount allocated to the petty cash fund,is known as the ________.

Accepted Answer

The imprest system is a method of accounting for petty cash that involves maintaining a constant balance in the account and requiring that cash plus petty cash tickets always equal the amount allocated to the fund. This ensures that the balance of the petty cash account remains accurate and that all expenditures are accounted for. The other choices (control system, voucher system, balanced system) do not specifically refer to the method of maintaining a constant balance in the petty cash account and are therefore not as appropriate.

Question 19

Mercury Company established a petty cash fund with a $600 balance.Which of the following statements is incorrect?

Accepted Answer

A journal entry is not needed to establish a petty cash fund. Instead, the initial funding of the petty cash fund is simply recorded by decreasing the amount of cash in the general ledger by debiting the Petty Cash account and credited the Cash account.

Question 20

A petty cash fund was established with a $550 balance.It currently has cash of $105 and petty cash tickets as shown below: $$\begin{array} { | l | r | } 
\hline \text { Travel expense } & \$ 105 \
\hline \text { Office supplies expense } & 310 \
\hline \text { Equipment rental expense } & 30 \
\hline
\end{array}$$ Which of the following would be the journal entry to replenish the Petty Cash account?

Accepted Answer

To replenish the Petty Cash account, the total of the expenses ($445) is debited to the various expense accounts, and Cash is credited for the same amount to reflect the cash outflow to replenish the fund.

Quiz 8: Internal Control and Cash