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Pick up the correct answer from the given choices(only one correct answer):
Q. The balance of the petty cash is
- a)an expense,
- b)income,
- c)an asset.
- d)liability
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Pick up the correct answer from the given choices(only one correct ans...
Explanation:
Petty cash is a small fund of cash kept on hand to pay for minor expenses, such as office supplies or postage. The balance of the petty cash represents the amount of cash remaining in the fund. It is classified as an asset because it is a resource owned by the company that has future economic value.
Reasons why the balance of the petty cash is an asset are as follows:
1. It is a physical asset - Petty cash is in the form of physical currency, which is a tangible asset.
2. It has future economic value - The balance of the petty cash can be used to pay for future expenses, which means it has economic value.
3. It is owned by the company - The petty cash is owned by the company, which makes it an asset.
Therefore, the balance of the petty cash is classified as an asset on the company's balance sheet. The amount of the petty cash is recorded as a debit to the petty cash account and a credit to the cash account when the fund is established. As expenses are paid from the petty cash, the petty cash account is debited and the appropriate expense account is credited. When the fund is replenished, the petty cash account is credited, and the cash account is debited.
Petty cash is a small fund of cash kept on hand to pay for minor expenses, such as office supplies or postage. The balance of the petty cash represents the amount of cash remaining in the fund. It is classified as an asset because it is a resource owned by the company that has future economic value.
Reasons why the balance of the petty cash is an asset are as follows:
1. It is a physical asset - Petty cash is in the form of physical currency, which is a tangible asset.
2. It has future economic value - The balance of the petty cash can be used to pay for future expenses, which means it has economic value.
3. It is owned by the company - The petty cash is owned by the company, which makes it an asset.
Therefore, the balance of the petty cash is classified as an asset on the company's balance sheet. The amount of the petty cash is recorded as a debit to the petty cash account and a credit to the cash account when the fund is established. As expenses are paid from the petty cash, the petty cash account is debited and the appropriate expense account is credited. When the fund is replenished, the petty cash account is credited, and the cash account is debited.
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Community Answer
Pick up the correct answer from the given choices(only one correct ans...
The balance of petty cash represents a small amount of cash that a business keeps on hand for minor expenses. It is classified as a current asset on the balance sheet because it is cash that is readily available for use.
- Asset: Petty cash is an asset because it is money owned by the business that can be used to pay for small, everyday expenses, such as office supplies, postage, or other minor purchases.
- Not an expense: While petty cash is used to pay for expenses, the cash itself is not classified as an expense until it is spent.
- Not income: Income refers to money received by the business, which is not the case for petty cash.
- Not a liability: A liability represents obligations or debts owed by the business, which petty cash is not.
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Pick up the correct answer from the given choices(only one correct answer):Q. The balance of the petty cash isa)an expense,b)income,c)an asset.d)liabilityCorrect answer is option 'C'. Can you explain this answer?
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