Many expenses of small nature are recorded in petty cash book. Start maintaining a general ledger in which to keep track of the petty cash and petty cash. Definition of an imprest system of petty cash an imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book.
The money drawn from the business bank account to put into the petty cash fund. 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 book 2019, imprest system of petty cash. Total the receipts that detail petty cash expenditures. Establish and administer petty cash, imprest and change. Nov 23, 2015 understand how the imprest system works in the petty cash book. A petty cash fund is established, with a set amount of cash. Petty cash imprest funds and reimbursements petty cash. Setting up a petty cash system is pretty straightforward and can be accomplished in eight easy steps. 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. Petty cash book explanation, format, example, ordinary. 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. Petty cash book 2019, imprest system of petty cash advantages.
The additional analysis columns are used to analyze expenditures as they arise. 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. You will also need to agree the maximum amount of money to be kept in the petty cash tin at any one time. The preferred method of reimbursements is by check, requested via a properly authorized and documented check request. The cash book can be maintained properly as petty transactions are maintained separately. Write the normal petty cash figure on a sheet of paper.
What are the advantages of maintaining a petty cash book. Any differences in the cash receipts affect the days receipts and not the change fund. Count the cash currently in the petty cash box or drawer. Advantages to using petty cash petty cash is an easy to understand and familiar method of paying for company expenses. The imprest holder should document the process of handing over the imprest fund cash and documents to the new holder, and a copy of the handing over report should be sent to the controller. Petty cash book explanation, format, example, ordinary and imprest. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Start maintaining a general ledger in which to keep track of the petty cash and pettycash. The most common imprest system is the petty cash system. 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. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds. The imprest system many groups use an imprest system for their petty cash.
A business has various sources of cash as well as different ways of. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. They are accountable for all monies in and out of the fund and makes sure it is maintained. Manage your business expenses anytime, anywhere with debitoor invoicing software.
The sum of money so kept in hand generally termed as petty cash and book in which. Jun 14, 2008 an imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount. An imprest system of petty cash means that the general. In a business operating this type of cash book, small cash payments are usually made out of petty cash. As the disbursements are for petty item hence the name petty cash. Explain how the imprest system of petty cash book works.
Is petty cash book, book of primary entry or ledger. The book has one column to record receipt of cash which is only from the main cashier and other columns to record payments of various types. What is the difference between an imprest and nonimprest. Balancing period the petty cashier is given fresh cheque of the amount equal to his payments during the same period. The petty cash book is the book for recording small disbursement, the rational behind the system is to reduce the numerous cash payment for small expenses. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. As the petty expenses are recorded by petty cashier hence the labor. An imprest is a cash account that a business uses to pay for small, routine expenses. If a business uses the imprest system, it will create an imprest. Nov 27, 2019 the imprest petty cash system is a method of accounting for petty cash expenses. The main advantages of petty cash book publish your article. These small cash payments are recorded in a separate book, known as a petty cash book. 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.
The exact amount of expenditure is reimbursed at intervals to maintain a fixed float c. 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. Under the imprest system maintaining petty cash book, petty cashier is provided with a fixed amount of money known as imprest or float which is sufficient to meet the needs of balancing period. Apr 29, 2020 such a system is known as the imprest system of petty cash. An imprest system is used to run and manage a petty cash fund. A petty cash fund is a segregation of an advance of money from a fund to be used for incidental purchases and for explicit purposes explained in paragraph 3. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. All expenditure out of the petty cash must be properly authorised. Fixed amount is paid to the petty cashier along with the imprest system. Create a petty cash account and write out a cheque for the appropriate amount. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. If you havent set aside money into petty cash imprest is lending money to. The controllers office shall take the necessary steps to effect the name change on the university financial system. Which of the following explains the imprest system of.
Petty cash imprest funds are provided to enable departments to make cash conveniently available for minor business expenditures. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. Advantages of petty cash book saving of time of the main cashier. The advantages of petty cash system enumerated are as follows. This can be handled by a junior member of the staff, making it. State of arizona accounting manual topic 20 current assets issued 070115 section 11 imprest funds, revolving funds and petty cash page 4 of 10 change funds should remain constant and should be removed at the end of the day from the receipts in the register. Understand how the imprest system works in the petty cash book.
Cash the cheque and create your first petty cash fund. Petty cash is the small cash reserves that businesses keep on the premises for miscellaneous cash needs. 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. The most common way of accounting for petty cash expenditures is to use the imprest system. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. Imprest petty cash question with answer college accounting. Daybooks doubleentry general ledger t accounts trial balance journal debits and. The attached article explains best practice for this. At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. Meaning of petty cash book, its importance and advantages. 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 the most common way of accounting for petty cash expenditures is to use the imprest system. Under imprest system, a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists of a week or month. Each month, accountants or other employees will need to balance petty cash and replenish the funds. It is an accessible, convenient way to pay for small purchases.
Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Cash book also functions as a ledger account as it has both the debit and the credit sides. What are the advantages of using the imprest system. The total of petty cash on hand plus the amount of signed receipts or petty cash vouchers at any one time must equal the total amount authorized for the imprest account. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. The initial fund would be created by issuing a cheque for. A petty cash book is just another kind of cash book that records petty cash transactions. 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. The money is paid in advance to the petty cash fund and is replenished only with the. Petty cash imprest sortmybooks helpdesk updated march 31, 2019 15. Which of the following explains the imprest system of operating petty cash. The imprest system is a form of financial accounting system.
During an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. The general system adopted for the recording of item in the petty cash book is refer to as the imprest systemin this system a specified sum is given to the petty cashier at the start. Cash book, pass book, bank reconciliation statement dr. A cash book acts like both a journal and a ledger for cash transactions. The check written to establish a petty cash fund in entered in the general journal by. How the imprest system of petty cash book works your. 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. Imprest system news newspapers books scholar jstor april 2015. This can be handled by a junior member of the staff, making it simpler for management. Petty cash is the small cash reserves that businesses keep on the.
It is an accounting book used for recording expenses which are of small and of little value. These petty cash expenses are recorded in the petty cash book. Petty cash book explanation, format, example, ordinary and. The most common example of an imprest system is the petty cash system.
Payments in cash of small amounts like traveling expenses, postage, carriage etc. Petty cash petty cash is used to purchase items or services on an emergency and infrequent basis, where it is not feasible or practical to submit a purchase order, request for payment, or use a procurement card. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. Petty cash book with imprest system simple and tabular forms. The cash is given to the petty cashier either on ordinary system or imprest. What is imprest system in maintain petty cash book. By watching this video you will understand how to record all the entries in. 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. Change funds change funds are established for the purpose of making change where cash is collected. Many of the companies that still use petty cash use the imprest system for tracking and. These small expenditures are usually paid using coins and currency notes rather. The analytical petty cash book and the imprest system. Subtract the total onhand cash from the opening balance. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. 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 firm may adopt imprest system of maintaining petty cash. Using imprest, the petty cash of a company is kept at a constant rate. The system is very useful specially if an analytical petty cash book is used. Petty cash book may be maintained by the ordinary system or by imprest system. The main advantages of imprest system of petty cash are as follows. The imprest system is an accounting system designed to track and document how cash is being spent. A company typically uses petty cash to make small purchases or reimburse employees for minor expenditures. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. The system is a form of managing petty cash in a business. How the imprest system of petty cash book works your business. Establish and administer petty cash, imprest and change funds. Dual function of the cash book cash book functions as a prime entry book as business records the receipts and payments of cash at. Petty cash and the imprest cash float system college. The chief cashier is relieved from the cumbersome work of petty cash disbursement.
Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established. From the following particulars prepare a petty cash book under imprest system. 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. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal expenditures of the business which is not related to the direct line of the business. The cash book and 8 the petty cash book ethaksalawa. Totals are carried forward from page to page until the end of the periods. Petty cash book maintains records of all petty payments systematically.