Which statement best describes the overall approach to petty cash and change funds?

Which statement best describes the overall approach to petty cash and change funds?

• A. They should be merged into one fund.
• B. They should be kept in the same drawer.
• C. They should be kept separate and controlled, not commingled.
• D. They should be eliminated.

Answer: (C)

The essential principle here is strong internal control over cash by keeping small-cash funds separate and accountable. Petty cash is set aside for minor, infrequent purchases and has its own receipts and replenishment process, while a change fund exists to provide exact cash for daily transactions and is counted at the start and end of a period. Keeping them separate and controlled prevents commingling, which would blur the trail of expenditures, complicate reconciliations, and increase the risk of errors or misuse. By assigning custodians, securing the funds in locked locations, and requiring proper documentation and periodic reconciliation, both funds remain traceable and properly managed. Merging them, placing them in the same drawer, or eliminating them would undermine these controls and create unnecessary risk.

The essential principle here is strong internal control over cash by keeping small-cash funds separate and accountable. Petty cash is set aside for minor, infrequent purchases and has its own receipts and replenishment process, while a change fund exists to provide exact cash for daily transactions and is counted at the start and end of a period. Keeping them separate and controlled prevents commingling, which would blur the trail of expenditures, complicate reconciliations, and increase the risk of errors or misuse. By assigning custodians, securing the funds in locked locations, and requiring proper documentation and periodic reconciliation, both funds remain traceable and properly managed. Merging them, placing them in the same drawer, or eliminating them would undermine these controls and create unnecessary risk.