CSLB Law & Business ExamBusiness FinancesEasy
A contractor keeps a $200 petty cash fund in the office to pay for small incidental expenses. Which practice best supports accurate recordkeeping for this fund?
- AOnly recording the total amount spent at the end of the year
- BAllowing employees to reimburse themselves without receipts if the amount is under $20
- CReplenishing the fund only when it reaches zero, without tracking individual purchases
- DRequiring a receipt for every purchase and reconciling the fund regularly
Show answer & explanationAnswer & explanation
Correct answer: D. Requiring a receipt for every purchase and reconciling the fund regularly
Good petty cash controls require a receipt for every disbursement and regular reconciliation to ensure the fund's balance matches recorded expenses. This maintains accurate records and prevents misuse of funds.
Why the other options are wrong
- A. Waiting until year-end makes it impossible to track individual expenses accurately.
- B. Allowing unreceipted reimbursements undermines proper documentation.
- C. Failing to track individual purchases makes the fund impossible to audit.
Petty Cash Controls
Procedures used to manage a small cash fund for minor expenses, requiring documentation and periodic reconciliation.
- Every disbursement should have a receipt
- Fund should be reconciled regularly, not just at replenishment
- Proper controls prevent misuse and support accurate recordkeeping
Memory trick: No receipt, no reimbursement — track every dollar.