Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. These small cash payments are recorded in a separate book, known as a petty cash book. Meaning of petty cash book, its importance and advantages. At the end of the period, the petty cashier is reimbursed with the same amount of cash which he reports having spent during that period. The importance of petty cash book imprest system is that it helps in basic bookkeeping. Overall, petty cash is a largely outdated and inefficient system. Read this article to learn about the meaning and preparation of analytical and imprest system of petty cash book. Advantages, disadvantages, and the pex alternative. Imprest, petty cash and other revolving funds office of the. The amount of petty cash also known as the petty cash fund varies by company or organization. In an imprest system, the amount in hand plus the amount. Ordinary system imprest system in this system petty cashier is given appropriate amount of cash after spending the whole of that amount the submits the account to the head cashier this is the system of paying advance in the beginning and reimbursing the amount system of petty cash book 7. Thus, the book is part of a manual record keeping system.
Petty cash book making the best use of these units at the beginning of the class, make sure that students understand what they are doing and why. It is the most scientific method to maintain petty cash. The amount will be below or equal to the limit set by the guidelines to this policy. Petty cash replenishment bookkeeping entries explained. By watching this video you will understand how to record all the entries in. 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. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. How the imprest system of petty cash book works your business. What is the petty cash imprest system, and why would a business use it. The petty cashier is given a sum of money in the beginning of the period. Perfect for maintaining accurate business accounts and monitoring petty cash flow. Most companies set up a special fund called a petty cash fund for small purchases and office expenditures.
Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established during an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. The cash is given to the petty cashier either on ordinary system or imprest. In almost all businesses, it is found necessary to keep small sums of ready money with thecashier or petty cashier for the purpose of meeting small expenses such as postage, telegrams, stationary and office sundries etc. Manage your business expenses anytime, anywhere with debitoor invoicing software. Petty cash is the small cash reserves that businesses keep on the. Besides maintaining a main or general cash book, many companies also maintain a small cash book known as petty cash book to record small day to day expenditures of the business petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel, newspapers, cleaning, pins, and causal labor etc. 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. These petty cash expenses are recorded in the petty cash book. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. The imprest system is an accounting system designed to track and document how cash is being spent. There are two primary types of entries in the petty cash b. These balances include savings and checking accounts. Learn more about petty cash expense management, and decide which system is right for your business. The imprest petty cash system is a method of accounting for petty cash expenses.
What is the petty cash imprest system, and why would a. At the end of the period a petty cash reconciliation is carried out. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. Imprest system of petty cash fund the world impress means advance amount which is personal to certain person to make petty expenses. Commission of fraud is reduced as the chief cashier verifies petty cash book along. Notes on systems of petty cash fund grade 10 accountancy. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below. Ledger for petty cash record keeping large 120 pages business accounts petty cash log book. Supplies and postage are recorded as expenses of the. 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 these are expenses which are incurred day after day. The firm may adopt imprest system of maintaining petty cash. 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. Any cash, which the petty cashier receives, will be recorded on the debit side left cash column of the book and any cash which he pays out will be recorded on the credit side right cash column of the boo k. How the imprest system of petty cash book works azcentral.
Cash imprest petty cash policy statement based on the cost centers request, the university assigns to one fulltime employee per cost center a petty cash fund commensurate to average departmental minor operating needs and obligations. Petty cash book 2019, imprest system of petty cash advantages. 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. Petty cash book format example definition explanation. The petty cash book is maintained by separate cashier known as petty cashier. Financial accounting multiple choice questions mcqs page 7. Petty cash and the imprest cash float system college. The usual and proper method of handling such payments is through a petty cash account maintained on the imprest system.
The total of various columns are posted to the wain cash book. The imprest petty cash float system is an important internal control tool to check cash and its usage or theft. One key component of the system is the need for documentation of all expenditures, which provides an excellent means of maintaining tight control over cash. The following financial accounting mcqs are collected from different past papers and from accounting mcqs bank. The daily transactions that use the petty cash are entered into this system which ensures that there is. Petty cash book imprest and ordinary petty cash systems. Petty cash book is used to record small receipts and payments, separately from regular cash book, to avoid making the work of cash book simple and less cumbersome. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. 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. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. The attached article explains best practice for this. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. How the imprest system of petty cash book works your. So, at all times, you can check how much should be left in.
Maintaining a cash book under the stated system is called an imprest petty cash book. 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. 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. Mar, 2018 the petty cash book is a formal summarization of petty cash expenditures, sorted by date.
Petty cashier is appointed in addition to the head cashier. What is the difference between an imprest and nonimprest petty cash account. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. During the period he makes payment out of this money. In a business operating this type of cash book, small cash payments are usually made out of petty cash. Mar 16, 2015 an imprest system of petty cash is used for more control over cash in hand. In most cases, the petty cash book is an actual ledger book, rather than a computer record. The main advantages of imprest system of petty cash are as follows. To open the account, a check for a round sum sufficient to care for such expenditures for a month or other convenient period, is given to the cashier and is charged on the general ledger. Petty cash book explanation, format, example, ordinary and imprest. Petty cash book can be maintained either in a simple or in analytical way.
What is the difference between an imprest and nonimprest. While convenient for small purchases, it is not a realistic solution for larger expenses. What are the advantages of a imprest system for petty cash. Under this system, total petty expenses for a particular period are estimated and the amount.
The cash allocated for petty expenditures for a specific period is entered on the credit side of general cash book and on the debit side of petty cash book. Under this system, a lump sum amount of cash money is given to the petty cashier. It may be maintained by ordinary or by the imprest system. This is so because, as explained later, subsequent checks drawn to replenish petty cash are not debited to petty cash account, but are charged directly to the various accounts for which the petty cash funds have been expended from this petty cash fund the cashier makes such payments as are necessary, recording each one in a book similar to that. It should be noted that there is no entry made to the petty cash fund. Every time when the person who control the bank accountdisbursement to petty cash is able to have a closer internal check on the actual petty cash expenditure incurred. Three different systems are being used for maintaining petty cash. From the following particulars prepare a petty cash book under imprest system. This makes the entire petty cash system susceptible to abuse.
This system of maintaining petty cash book is called the imprest system. Petty cash book is maintained by the petty cashier. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. The analytical petty cash book and the imprest system. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. An imprest system of petty cash is used for more control over cash in hand. 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. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book.
The most common way of accounting for petty cash expenditures is to use the imprest system. Download citation on researchgate the analytical petty cash book and the imprest system in module 12, which covered the bank cash book, the. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. Besides maintaining a main or general cash book, many companies also maintain a. 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. 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. First, management has to estimate how many small purchases it will make and much money it will need for these purchases.
The petty cash book is a formal summarization of petty cash expenditures, sorted by date. The most common imprest system is the petty cash system. An imprest is a cash account that a business uses to pay for small, routine expenses. An imprest system is a method to account for petty cash by maintaining a balance in a fund that equals petty cash receipts plus additional cash in the fund. Understand how the imprest system works in the petty cash book. 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.
In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. The most common example of an imprest system is the petty cash system. At end the firm reimburses him the amount paid by him so that the balance of cash with him. The cash added to the fund simply replaces the expense vouchers.
What are the importance of petty cash imprest system answers. Most companies set up a special fund called a petty cash fund for small. Each transaction recorded in the books of accounts goes through these three main accounts in order to get captured. Establish and administer petty cash, imprest and change. Now i have been given 2 mock exams for unit 2 to do for homework this week and they are completely different to what we have been learning. It should also be kept in mind that petty cash book is not like the cash book. Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible.
A cash book is a type of subsidiary book where cash or bank receipts and cash or bank payments made during a period are recorded in a chronological order. Nov 04, 2015 ordinary system imprest system in this system petty cashier is given appropriate amount of cash after spending the whole of that amount the submits the account to the head cashier this is the system of paying advance in the beginning and reimbursing the amount system of petty cash book 7. We are doing the exercise on page 12 to help you to remember key words to help your writing skills to help with grammar etc. Petty cash book 2019, imprest system of petty cash. Payments in cash of small amounts like traveling expenses, postage, carriage etc. The petty cash imprest system allows only the replenishment of the spend made. Nov 23, 2015 understand how the imprest system works in the petty cash book.
Also included as a part of cash are the balances kept at banking and financial institutions. Imprest system of petty cash is a system where the petty cashier is given a lump sum in cash often called a float keeping in view the possible needs of the business to meet its petty expenses for a stated period, e. So, if you start the month with 100 in your petty cash float and spend 90 of that cash in the month, an. An imprest system is used to run and manage a petty cash fund. Petty cash book definition the petty cash book is defined as relatively small amount of cash kept at hand for making quick payments for miscellaneous small expenses in the business concern. Uses of petty cash book its a cash book used to enter daily petty expenses like cost of stationery, postage and xerox copy and so on. The imprest system is a form of financial accounting system. In an imprest system, the amount requested is documented. We have been learning in class and for homework for the past 2 weeks how to draw up a petty cash book imprest.
Definition of petty cash petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Petty cash book is maintained to record small expenses such as postage. Totals are carried forward from page to page until the end of the periods. This type of book is maintained just like a cash book.