Which one of the following statements is true?
A)Sound internal control practice dictates that disbursements should be made by check.
B)Good cash management practice dictates that large cash balances should be maintained.
C)The person handling cash should also prepare the bank reconciliation.
D)Petty cash can be substituted for a checking account to expedite the payment of all disbursements.

Question

Quizplus · Accepted Answer

Sound internal control practice dictates that disbursements should be made by check as it provides a paper trail and reduces the risk of fraud and errors. Option B is not true as maintaining large cash balances can result in a loss of earnings and increase the risk of theft. Option C is not true as ideally, the person handling cash should not be responsible for preparing the bank reconciliation to ensure proper segregation of duties. Option D is not true as petty cash is meant only for small expenses, and a checking account is necessary for larger disbursements.

Which One of the Following Statements Is True