Wanda White acquired a sports equipment distribution business with a staff of six salespeople and two clerks. Because of the trust that Wanda had in her employees-after all, they were all her friends and just like members of the family-she believed that an honour system in regard to the operation of the petty cash fund was adequate. Consequently, Wanda placed $300 in a coffee jar, which, for convenience, was kept in a cupboard in the common room. All employees had access to the petty cash fund and withdrew amounts as required. No vouchers were required for withdrawals. As required, additional funds were placed in the coffee jar and the amount of the replenishment was charged to "miscellaneous selling expense."
Required
1. From the internal control point of view, discuss the weaknesses of the petty cash fund operation and suggest steps necessary for improvement.
2. Does the petty cash fund operation as described above violate any of the generally accepted accounting principles? If yes, which, and how are the principles violated?