Cb14 - 5.1 - Petty Cash

The statement is False because petty cash is a small amount of cash that companies keep on hand to cover small expenses such as office supplies or minor purchases. It is convenient for companies to use petty cash for these small expenses instead of going through the formal process of writing a check or using a credit card. While it is important to have proper controls and monitoring in place to prevent misuse, petty cash can be a useful tool for managing day-to-day expenses.

A custodian is the employee directly responsible for the fund. This means that they have the primary responsibility for safeguarding and managing the fund's assets, including handling transactions, record-keeping, and ensuring compliance with regulations. They play a crucial role in maintaining the integrity and security of the fund's investments. Therefore, the statement "A custodian is the employee directly responsible for the fund" is true.

Petty cash is a small amount of cash that is kept on hand to cover small expenses that occur in the day-to-day operations of a business. These expenses are typically of a nominal amount, meaning they are small and not significant enough to warrant writing a check or using a credit card. Using petty cash for expenses of a nominal amount helps to streamline the reimbursement process and avoid the need for multiple small transactions through the regular bank account.

In a petty cash context, cash refers to physical currency that is used as a medium of exchange. It includes banknotes and coins that can be used to make immediate payments. Checks, gift cards, credit card receipts, and IOUs are not considered as cash because they represent different forms of payment or debt. Therefore, the correct answer is currency.

Audits of funds are usually required, not just conducted. This means that it is mandatory for funds to undergo audits to ensure transparency, accuracy, and compliance with regulations. Conducting audits is a standard practice to assess the financial health and integrity of funds, detect any irregularities or fraud, and provide assurance to stakeholders. Therefore, the correct answer is False, as audits of funds are typically required.

Petty Cash funds are usually the least desirable form of payment because they are less secure. Compared to other forms of payment, such as checks or electronic transfers, petty cash funds are more susceptible to theft or misuse. They are also more difficult to track and monitor, making them a less secure option for managing expenses. Therefore, they are considered the least desirable form of payment.

Petty Cash transactions must always be recorded with a receipt and a memorandum. A receipt serves as proof of the transaction and provides details such as the date, amount, and purpose of the expense. It helps in maintaining an accurate record of the cash flow. A memorandum, on the other hand, includes additional information like the names of individuals involved and any relevant notes or explanations. This helps in providing a comprehensive record and aids in tracking and reconciling the petty cash expenses.

The correct answer is "None of the above." Petty cash funds are not always limited to a specific amount or percentage of sales. The amount of money in a petty cash fund can vary depending on the needs of the fund custodian and the organization's policies. There may be certain guidelines or limits set by the organization, but it is not a fixed amount like $2,500, $500, or 5 percent of the day's sales.

Petty cash should be used on an exceptional basis. This means that it should only be used in rare or unusual circumstances, rather than as a regular or routine method of payment. The other options, "exseptionol" and "exceptionol," are likely misspellings of the word "exceptional" and do not accurately convey the intended meaning.

Both "commingle" and "comingle" mean to mix or blend together. In the given question, it is stated that petty cash funds should not be mixed or blended with other accounts. Therefore, the correct answer is "commingle" or "comingle" as they both convey the same meaning of not mixing petty cash funds with other accounts.