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 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 resources of. From the following particulars prepare a petty cash book under imprest system. Here the petty cashier is given a lump sum amount of money at the beginning of the accounting period. The imprest system is a form of financial accounting system. Petty cash book may be maintained by ordinary system or by imprest system. The most common example of an imprest system is the petty cash system. A petty cash book takes in relevant details concerning purchases. When the account goes below a certain specified amount, the system is replenished. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. Staff would then be reimbursed back though petty cash. An imprest system is used to run and manage a petty cash fund. 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.
Read this article to learn about the meaning and preparation of analytical and imprest system of petty cash book. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. 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. Most companies set up a special fund called a petty cash fund for small purchases and office expenditures. These petty cash expenses are recorded in the petty cash book. The petty cashier makes the small payments and records them in the petty cash book. There are 2 types of petty cash the imprest system and the nonimprest system but i wont go into that as i think id run out of room. Overall, petty cash is a largely outdated and inefficient system. There are two primary types of entries in the petty cash b. No receipt with the exception of money received from the chief cashier, however small it may be, is recorded in it. An imprest system is a method to account for petty cash by.
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. Sep 30, 2019 overall, petty cash is a largely outdated and inefficient system. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. As the disbursements are for petty item hence the name petty cash. Concept and meaning of petty cash fund and system of petty. The system in which petty cash fund is reimbursed for the petty expenses incurred is called imprest system of petty cash. For instance, a business estimates that a sum of rs 500 is required to meet small expenses in the business for one week. How the imprest system of petty cash book works your. The petty cash imprest system allows only the replenishment of the spend made. The main advantages of imprest system of petty cash are as follows. The importance of petty cash book imprest system is that it helps in basic bookkeeping. 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. 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.
This method is a structure of financial accounting system. An imprest system is an accounting system that involves monitoring and managing petty cash payouts and subsequent replenishment. This video shows the creation and replenishment of petty cash. The fundamental difference between the main cash book and the petty cash book is that only petty expenses are recorded in the petty cash book. The daily transactions that use the petty cash are entered into this system which ensures that there is. Petty cash and the imprest cash float system college. At the end of the week or month the actual amount spent by. What is the petty cash imprest system, and why would a.
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. Explain the relationship between the cash book and petty cash book please. The most common imprest system is the petty cash system. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount.
Using imprest, the petty cash of a company is kept at a constant rate. This system makes it easier to monitor expenses, flag discrepancies, and ultimately detect fraud. 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. The petty cash book usually consists of a columnar book with one side used to record the original receipt of cash to establish the fund, and the other to analyse payments by expense categories, such as.
The imprest petty cash system is a method of accounting for petty cash expenses. Like columnar petty cash book, it also contains many money columns in the credit side and one money column in the debit side and a particular column and a date column are also similar to that of the columnar or analytical petty cash book. What are the advantages of maintaining a petty cash book. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. May 09, 2014 generally, petty cash book is maintained on imprest system. Causes for difference between cash book balance and pass book balance. Nov 27, 2019 the petty cash book is not part of the double entry bookkeeping system, and is used simply to record movements on the petty cash imprest fund. In some cases, a description field is provided to help the petty cashier feed insufficient information about every purchase.
The imprest system is a system for controlling petty cash. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established. The second system of petty cash is the imprest system. The general description of imprest involves establishing a fund or account for the.
Petty cash book format example definition explanation. The additional analysis columns are used to analyze expenditures as they arise. These small expenditures are usually paid using coins and currency notes rather than checks. Manage your business expenses anytime, anywhere with debitoor invoicing software. Imprest system of petty cash fund the world impress means advance amount which is personal to certain person to make petty expenses. How the imprest system of petty cash book works your business. The cash receipts will be recorded together with the payments which will be analysed in the same way as a cash book. 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. The system is a form of managing petty cash in a business. Therefore a separate book called petty cash book is maintained by a cashier called the petty cashier. Required a state one advantage of the imprest system of petty cash. What are the advantages of using the imprest system.
Controllimitkeep track of petty cash expenditure the cash remaining and the vouchers received should equal the imprest can help to reduce fraud or other suitable advantage. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. The petty cash book is not part of the double entry bookkeeping system, and is used simply to record movements on the petty cash imprest fund. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. 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. The balance of the petty cash book will be shown on the asset side of balance sheet as. Petty cash funds are routine expenses that involve the insignificant amounts of money not eligible for credit card and cheque payments. Many of the companies that still use petty cash use the imprest system for tracking and record usage and replenishment in a petty cash book. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below. To record such expenses, a different book known as a petty cash book is maintained. Generally, petty cash book is maintained on imprest system.
Totals are carried forward from page to page until the end of the periods. The imprest system is an accounting system designed to track and document how cash is being spent. What is the petty cash imprest system, and why would a business use it. An imprest is a cash account that a business uses to pay for small, routine expenses. Sales day book is where a company will record sale transactions for a particular day, this will enable them to keep track on how well the business is doing. In most cases, the petty cash book is an actual ledger book, rather than a computer record. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. So, if you start the month with 100 in your petty cash float and spend 90 of that cash in the month, an.
Explain the term imprest system 2 discuss the double entry. For smallscale business, simple petty cash book is sufficient but on a medium or large scale business number of petty expenses increases hence it is desirable. The mount paid by him during the period for expenses. The various columns are totalled to show the reason for making payments, and then the respective ledger accounts are debited. Causes for difference between cash book balance and pass. Many business normally keeps a small amount of money to meet some small cash disbursements like payment of postage, medical claims, staff traveling claims. Petty cash is the small cash reserves that businesses keep on the. It may be maintained by ordinary or by the imprest system. One key component of the system is the need for documentation of all. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check.
Mar, 2018 the petty cash book is a formal summarization of petty cash expenditures, sorted by date. The person petty cashier is given an amount in advance of expenditure. The petty cash book is maintained by separate cashier known as petty cashier. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Need and importance of bank reconciliation statement. Under the imprest system, the chief cashier replenishes the cash such that the petty cash box always has the same amount. Jan 08, 2015 the petty cash account is used to make small purchases. The imprest system is an accounting system for paying out and subsequently replenishing petty cash.
Petty cash book 2019, imprest system of petty cash. The firm may adopt imprest system of maintaining petty cash. Explain how the imprest system of petty cash book works. Explain the term imprest system 2 discuss the double entry system applicable to from acc 101 at abe international college of business and accountancy tacloban branch. It is a system of petty cash book where a person is given a fixed amount in the beginning of the period, the petty cashier submits the account of.
Below is a breakdown of all columns and information contained in a petty cash book. Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. When an analytical petty cash book is maintained for recording the petty expenses, it will be practically more convenient to consider the petty cash as a separate account and take cheques issued for the petty cash imprest as a debit to petty cash account and all petty expenses paid as credits in petty cash account. Thus, the book is part of a manual recordkeeping system.
The amount of petty cash also known as the petty cash fund varies by company or organization. At the week end or earlier, the petty cashier spent rs 480 and needs more 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. The petty cash account is used to make small purchases. The most wellknown type of imprest is a petty cash account, which is used to cover smaller transactions. Under this method, the amount essential to assemble out various petty operating costs is estimated and given to the petty cashier at the beginning of. Understand how the imprest system works in the petty cash book. 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. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. The imprest system principles of accounts singapore. Petty cash book is a formal summarization of petty cash expenditures, sorted by date.
His transactions for the month of september 2007 were. In case of ordinary system of petty cash, the petty cashier is given a certain amount of cash and after spending the whole of that amount, he submits the accounts to the. Under this system an estimate is made of the amount required for small payments for a certain period, say, a week or a month and this amount is paid to the petty cashier in advance. Related posts meaning of petty cash book, its importance and advantages types of petty cash book. What are the importance of petty cash imprest system answers. This makes the entire petty cash system susceptible to abuse or fraud. Required a explain what is meant by the imprest system in relation to petty cash books. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. 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. While convenient for small purchases, it is not a realistic solution for larger expenses. The imprest petty cash float system is an important internal control tool to check cash and its usage or theft. 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.
Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. This period could be a week, a month or even sometimes a day. 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. This system is known as imprest system of petty cash book.
The most general imprest system is the petty cash system. These are expenses which are incurred day after day. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. It is the system under which, an estimate is made of amount for petty expenses fort a period it could be for a week, a fortnight or a month. Recording of transaction in cash book and journal with specimen. The imprest system is a financial accounting system designed to track and document how cash is being spent. An imprest system will be adopted for the petty cash book. Under this system, the petty cashier is given a fixed sum of money in the beginning of the month or week.
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. A petty cash book, therefore, serves the purpose of a ledger, keeping track of all business payments made on a small scale. 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. Note that the fund is reimbursed by debiting individual expense account and crediting petty cash account. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty cash is also the title of the general ledger current asset account that reports the amount of the companys petty cash. 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. But in the main cash book all receipts big and small and large expenses are recorded. Jun 14, 2008 an imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount. Payments in cash of small amounts like traveling expenses, postage, carriage etc.