Which of the Following Procedures Is Incorrect for Establishing and Maintaining

question 202

Multiple Choice

Which of the following procedures is incorrect for establishing and maintaining a petty cash fund?

• A)A check is prepared for a small, fixed amount; when the check is cashed, the money is entrusted to a petty cash custodian.
• B)The company must obtain the cash needed for the fund and record an entry for the establishment of the fund.
• 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 needs to be replenished, an entry is recorded to recognize an increase in the petty cash account.

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Definitions:

Operating Income

This is the profit realized from a business's ongoing operations, calculated as the difference between operating revenues and operating expenses.

Land Account

A type of asset account on the balance sheet representing the cost of land owned by a company.

Accounts Payable

Liabilities of a business that are due to be paid to creditors within a short period of time, typically one year.

Supplies Expense

This refers to the cost recorded for supplies used during an accounting period, not necessarily when they were purchased.