Final answer:
It is true that a petty cash fund is established when a business writes a check designated to 'Petty Cash' for a certain amount. This fund allows for handling of small expenses without the need for checks or bank payments. It is managed by a designated custodian responsible for its security and accounting.
Step-by-step explanation:
The statement that the petty cash fund is opened when the business writes a check payable to "Petty Cash" for the designated amount to be kept in the petty cash fund is true.
To establish a petty cash fund, a company will write a check for the desired amount of money they wish to keep on hand for small, routine expenses. This check is then cashed, and the cash is stored in a secure location, often in a lockbox or drawer, and is used to make purchases that are then tracked with receipts and vouchers.
Having a petty cash fund is convenient for small-scale transactions where using checks or bank payments would be cumbersome or inefficient. Companies typically designate a petty cash custodian to manage this fund, who is responsible for maintaining its security, the accuracy of its bookkeeping, and requesting replenishments when necessary.