Which accounts are used when establishing a change fund?

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Study for the Accounting CBE Exam. Gain insights with flashcards and multiple-choice questions, each paired with detailed explanations. Prepare for your accounting certification!

Multiple Choice

Which accounts are used when establishing a change fund?

Explanation:
A change fund is a dedicated cash pool used specifically to provide change to customers. When you establish it, you create a separate asset account for the Change Fund and move cash from the main Cash account into it. The appropriate accounting entry is a debit to Change Fund and a credit to Cash. This keeps the change amount isolated from everyday cash and tracked separately. Other options mix in accounts that aren’t used to set up a cash change pool: Petty Cash would imply a different type of cash fund, and Accounts Receivable or Revenue relate to amounts due or income, not to creating a change fund.

A change fund is a dedicated cash pool used specifically to provide change to customers. When you establish it, you create a separate asset account for the Change Fund and move cash from the main Cash account into it. The appropriate accounting entry is a debit to Change Fund and a credit to Cash. This keeps the change amount isolated from everyday cash and tracked separately.

Other options mix in accounts that aren’t used to set up a cash change pool: Petty Cash would imply a different type of cash fund, and Accounts Receivable or Revenue relate to amounts due or income, not to creating a change fund.

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