Final Answer:
The given statement, "When replenishing the petty cash fund, the business debits either the expense incurred or the asset purchased with the funds," is true (A) because the business debits either the expense incurred or the asset purchased with the petty cash funds because it reflects the outflow of cash for either immediate expenses (which are debited as expenses) or for assets (which are debited as asset purchases) in the accounting records.
Step-by-step explanation:
When replenishing the petty cash fund, it's crucial to appropriately account for the cash used. If the funds were utilized for immediate expenses like office supplies or small repairs, the business debits those expenses. In this case, the expense account is increased, reflecting the amount spent from the petty cash. Conversely, if the cash was used to purchase assets such as equipment or small tools, the business debits the asset account, recognizing the acquisition of the asset.
Ultimately, whether debiting expenses or assets, the aim is to accurately represent where the funds were allocated and to maintain precise financial records.
Correct answer: A. True