Future Business Leaders of America (FBLA) Accounting Practice Test

What is the purpose of a petty cash slip?

1. To record large payment transactions

2. To show proof of a petty cash payment

3. To summarize financial statements

4. To arrange accounts in a ledger

The correct answer is: To show proof of a petty cash payment

A petty cash slip serves as documentation of a petty cash payment. When an amount is withdrawn from the petty cash fund for a small business expense, the petty cash slip is completed and provides a written record of that transaction. This slip usually contains details such as the date of the expense, the amount spent, and the purpose of the payment. It plays a crucial role in maintaining the accuracy of the petty cash account by ensuring that all expenditures are properly documented and can be tracked for future reference. By having a clear record through the petty cash slip, businesses can effectively manage their cash flow and ensure accountability. This is particularly important for small expenses that may not require formal invoicing or purchase orders. The petty cash slip helps reconcile the petty cash fund at the end of a specified period by providing evidence of disbursements made, supporting transparency and ensuring that the fund remains accurately balanced.