Is there a better way to solve the small expenditure dilemma. Petty cash book definition, types, format, examples. Petty cash book and advantages of imprest system youtube. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. If small amounts of cash are received by the business during an accounting period, they should not be included in the imprest petty cash system, but banked separately into the cash checking account. Marks the advantages of using the imprest system are. What are the advantages of maintaining a petty cash book. Mar 12, 2020 the advantages of the imprest system are as follows. Using imprest, the petty cash of a company is kept at a constant rate. The initial fund would be created by using cheque by desired amount.
The amount of petty cash also known as the petty cash fund varies by company or organization. Imprest petty cash question with answer college accounting. Petty cashier is given the appropriate amount of cash and after spending the whole of that amount, he submits the account to the head cashier. A fixed balance is maintained in the account, and it is replenished routinely to maintain that.
Petty cash is an easy to understand and familiar method of paying for company expenses. Mar 27, 2020 a petty cash system is a set of policies, procedures, controls, and forms that a company uses to dispense cash for various miscellaneous needs, such as office supplies and services. The cash is given to the petty cashier either on ordinary system or imprest. Nov 27, 2019 for simplicity and to maintain proper control over cash, it is best to only use the imprest petty cash fund to deal with cash expense payments. Lecture 5 the analytical petty cash book and the imprest system every business has a number of transactions of very small value which, were they all recorded in the cash book, would only serve to make it more difficult to identify the important transactions that businesses need to keep a close eye upon. The imprest system is a form of financial accounting system.
Another advantage is that small items of expenditure can be recorded separately in the. A separate column is allotted for each type of expenditure. Before the rise in the use of credit cards and charge cards, nearly all companies used petty cash accounts to allow employees responsible for purchasing small supplies to do so with minimal hassle. It is an accessible, convenient way to pay for small purchases. What are the advantages of a imprest system for petty cash. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. The advantages of petty cash system enumerated are as follows. The base characteristic of an imprest system is that a fixed amount is reserved, which after a certain period of time or when circumstances require, because money was spent, it will be replenished.
Apr 19, 2010 a petty cash book is a book of vouchers which are prepared each time a disbursement is made from petty cash. An imprest system is used to run and manage a petty cash fund. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. Causes for difference between cash book balance and pass book balance. For all detailed video solutions of ts grewal questions of xi and xii accountancy please keep visiting this channel. The various columns are totalled to show the reason for making payments, and then the respective ledger accounts are debited. In large business concerns, the petty cash book is maintained in columnar or analytical form, with a separate column for each usual item of expense and a column for. The cash book can be maintained properly as petty transactions are maintained separately. There are three main advantages of using a petty cash book. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Petty cash funds are established for departmental use for incidental and emergency small dollar purchases where the use of alternative means imprest system advantages reasons to use the imprest system, three main imprest system advantages, the principles of imprest system work, main imprest features and facts.
A petty cash book records petty payments made in each department by the petty cashiers. Manage your business expenses anytime, anywhere with debitoor invoicing software. Most cash should be deposited right away in the bank, but a small amount can be kept on hand in a petty cash account earmarked for minor. Read this article to learn about the meaning and preparation of analytical and imprest system of petty cash book. Sep 30, 2019 is the petty cash box a help or a hindrance. What are the advantages of using the imprest system. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. Petty cash book helps in making the records of cash transactions uptodate because of division of labor in recording cash. In large business concerns, the petty cash book is maintained in columnar or analytical form, with a separate column for each usual item of expense and a column for total.
Under imprest, petty cash book system petty cashier submits a statement of expenditure to the head cashier at an interval of a certain period and thereafter receives funds from him for further expenses. The importance of petty cash book imprest system is that it helps in basic. The voucher would show the date, amount, recipient, purpose and general ledger account. Below is a very simple worked question and answer for the reader to enhance the understanding of imprest petty cash system. Petty cashier is not allowed to keep idle cash with him if the float is found to be more than adequate. Such payments include postage, reimbursement to employees for small purchases of office supplies and numerous similar items. The most common way of accounting for petty cash expenditures is to use the imprest system. Mar 16, 2015 an imprest system of petty cash is used for more control over cash in hand. Advantages of the imprest system 12 accounting for cash. Imprest account imprest system example the strategic cfo. The balance of the petty cash book will be shown on the asset side of balance sheet as cash in hand at the end of the year.
These small cash payments are recorded in a separate book, known as a petty cash book. An imprest system is a system using loans as control against fraud and theft. Meaning of petty cash book a petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically. This unique feature of the imprest petty cash system is one of its most important advantages as it allows spot checks to be made on the petty cash fund at any point in time, as demonstrated in the table below. The most common example of an imprest system is the petty cash system. The imprest system principles of accounts singapore.
As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. A fixed amount of cash is allocated to a petty cash fund, which is. These small expenditures are usually paid using coins and currency notes rather than. Please like, share and subscribe the content for more high quality videos. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. Petty cash is the small cash reserves that businesses keep on the premises for miscellaneous cash needs. The imprest system is an accounting system designed to track and document how cash is being spent. Petty cash costs receipts are used as the basis for periodic replenishments of the petty cash fund.
Some of your workers could use the cash for purchases such as lunch or other personal needs that do not benefit your business. The imprest system of petty cash is used by most of the companies because of the following advantages. This makes the entire petty cash system susceptible to abuse or fraud. Petty cash book can be maintained either in a simple or in analytical way. Outline the advantages of the imprest system as a system. Payments in cash of small amounts like traveling expenses, postage, carriage etc.
Understand how the imprest system works in the petty cash book. What is the different cash book and petty cash book. Explain the petty cash book and how the imprest system works. The chief cashier is relieved from the cumbersome work of petty cash disbursement. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. From the following particulars prepare a petty cash book under imprest system. The cash book can be maintained properly as petty transactions. Petty cash book 2019, imprest system of petty cash advantages.
Jul 16, 2019 petty cash works on the imprest system, in which there is an initial amount of money put into an account, which is drawn upon for a specific purpose in this case, petty cash. Advantages, disadvantages, and the pex alternative. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. The base characteristic of an imprest system is that a fixed amount is reserved, which after a certain period of time or when circumstances require, because money was spent, it.
The second system of petty cash is the imprest system. A s the petty cashier has to produce to the chief cashier the petty cash book for inspection, it acts as a healthy check on the petty cashier. Advantages of petty cash book saving of time of the main cashier. The petty cash book is ruled in the form of the single column cash book with an amount column and addition oat columns for the more usual classes of expenditure. When creating a petty cash account, be sure to document the origin of the cash you use to start with, and also keep a petty cash book to track your every petty cash purchases. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. The head cashier before funding again examines the. What are the advantages of a imprest system for petty cash answers.
Also, find out its uses and functions in any contemporary business setup. Petty cash book with imprest system simple and tabular. Petty cash works on the imprest system, in which there is an initial amount of money put into an account, which is drawn upon for a specific purpose in this case, petty cash. Also included as a part of cash are the balances kept at banking and financial institutions. When the account goes below a certain specified amount, the system is replenished. Study 101 terms accounting 1a ch7 booknotes flashcards. Petty cash book is maintained by the petty cashier. Petty cash book may be maintained by the ordinary system or by imprest system. Need and importance of bank reconciliation statement. Imprest system meaning in the cambridge english dictionary. This imprest account is created for the sole reason of taking care of the less crucial aspects of the organization. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. An imprest is a cash account that a business uses to pay for small, routine expenses.
Petty cash book is an accounting book used for recording expenses which are small and of little value, for example, stamps, postage and handling, stationery, carriage, daily wages, etc. Meaning of petty cash book, its importance and advantages. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. How the imprest system of petty cash book works your. Read on for more information on petty cash book advantages, format, systems, and example. The amount of the imprest should be as low as possible and the number of floats in use should be kept to a minimum. The difference between the total of the debit items and that of the total column on the credit represents the balance of the petty cash in hand. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. The petty cash custodian will cash the check and add the amount to the other cash.
Control over the petty cash occurs during the replenishment process. The most common imprest system is the petty cash system. The imprest system reduces the chances of misuse of cash because the float can be immediately reduced if it is found to be more than adequate for the agreed period. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. The main advantages of imprest system of petty cash are as follows. As far as imprest accounting goes, petty cash in an imprest account is not overly difficult to. For most businesses, these downsides of using petty cash far outweigh.
Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system along with its advantages and disadvantages. The petty cash book accounts for the cash spent on this short term arising needs of the company and it is necessary for accountability for the expenditure on the. When cash is paid from the checking account, the entry is a debit to the various expenses for which receipts are being supplied by the petty cash. The petty cash book is a document in business used for recording misclenius expenditure this are the unplanned and shallow demands that may arise in the daily running of the business. The various columns are totalled to show the reason for making payments, and then the. Here the petty cashier is given a lump sum amount of money at the beginning of the accounting period. You may learn more about accounting basics from the following articles. The importance of petty cash book imprest system is that it helps in basic bookkeeping.
Petty cash book format example definition explanation. Advantages of the imprest system of keeping petty cash the petty cash book is used to record small payments. Many expenses of small nature are recorded in petty cash book. In a imprest system, a cashier is provided a small amount to meet the petty expenses of a given period and is authorized to make such payments. The basic process of setting up a petty cash system is.
Petty cash book is maintained by petty cashier and acts as the petty cash account. The analytical petty cash book and the imprest system. How the imprest system of petty cash book works your business. The additional analysis columns are used to analyze expenditures as they arise. Imprest system petty cash book is quite helpful when the firm uses analytical petty cash book, wherein the book has one column to track the receipt of the amount, from the chief cashier and several other columns to write down expenses under the specific head. Advantages to using petty cash petty cash is an easy to understand and familiar method of paying for company expenses.
The petty cash book is maintained by separate cashier known as petty cashier. These are expenses which are incurred day after day. Petty cash accounting procedures reconciliation uses. Many of the companies that still use petty cash use the imprest system for tracking and. By using this site, you agree to its use of cookies. You need to develop a set of policies or procedures dictating the handling of cash in your business to avoid problems such as theft and misappropriation. Petty cash is the small cash reserves that businesses keep on the. Here we discuss the format of petty cash book, types of petty cash systems. Less transactions are entered in the main cash book making it less cluttered with only monthly totals transferred to the general ledger. Petty cash book 2019, imprest system of petty cash. Due to grow of electronic transactions, the imprest system is becoming less common.
Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash. The petty cash fund is an accounting tool that helps you to manage and track small purchases that are not appropriate to make a check payment or using your credit card. What is the importance of petty cash in a business. As head cashier check the accounts of previous month and gives advance for the coming month, does, errors if any are reduced. If a business uses the imprest system, it will create an imprest. The main advantages of petty cash book publish your article. In a business operating this type of cash book, small cash payments are usually made out of petty cash. The advantages of using a petty cash book are as follows. Fixed amount is paid to the petty cashier along with the imprest system. Cash includes currency and coins, although most businesses do not keep much of this type of cash around. Designate someone other than the petty cash custodian to maintain records of transactions and disbursements. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash. The cash book can be maintained properly as petty transactions are maintained.
Advantages of the imprest system 12 accounting for cash sales and cash from accounting 2338 at st. An imprest system is a system using loans as control against fraud. Petty cash book 2019, imprest system of petty cash advantages petty cash book. Here are some advantages and disadvantages to using petty cash as an expense management solution. This period could be a week, a month or even sometimes a day. The daily transactions that use the petty cash are entered into this system which ensures that there is. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. Petty cash book explanation, format, example, ordinary and imprest. These petty cash expenses are recorded in the petty cash book. The system is a form of managing petty cash in a business.