What is the primary purpose of the Change Fund?

What is the primary purpose of the Change Fund?

• A. To record all stock purchases
• B. To reconcile bank statements
• C. To track day-to-day cash shortages and overages
• D. To control accounts payable

Answer: (C)

The Change Fund exists to keep a small amount of cash on hand specifically to make everyday change. Its main purpose is to track day-to-day cash shortages and overages, so any difference between the cash physically on hand and the recorded balance can be identified and investigated promptly. This supports strong cash handling controls, ensuring the amount set aside for making change stays accurate and auditable over time. It’s not about recording inventory purchases, reconciling a bank statement, or managing accounts payable—those are separate processes. If a discrepancy happens, it’s typically recorded as a cash over or short, guiding corrective actions.

The Change Fund exists to keep a small amount of cash on hand specifically to make everyday change. Its main purpose is to track day-to-day cash shortages and overages, so any difference between the cash physically on hand and the recorded balance can be identified and investigated promptly. This supports strong cash handling controls, ensuring the amount set aside for making change stays accurate and auditable over time. It’s not about recording inventory purchases, reconciling a bank statement, or managing accounts payable—those are separate processes. If a discrepancy happens, it’s typically recorded as a cash over or short, guiding corrective actions.