An imprest is a cash account that a business uses to pay for small, routine expenses. With an imprest system, accountants or bookkeepers track petty cash in the petty cash book. How the imprest system of petty cash book works your. Is there a better way to solve the small expenditure dilemma. Suppose for example a business maintains a petty cash fund of 300. In order to gain deep understand, please refer to the petty cash book example below. Under the imprest petty cash system, the petty cashier amount is fixed for a given time period under which is usually under a month or a week. Here are some advantages and disadvantages to using petty cash as an expense management solution. Nov 27, 2019 the imprest petty cash fund is established. The imprest system is a form of financial accounting system. The bookkeeper records the amount allocated to the petty cash fund in the petty cash book, which subsequently reflects all changes to the petty cash fund. What are the advantages of a imprest system for petty cash. 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 daily transactions that use the petty cash are entered into this system which ensures that there is. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Petty cash meaning, examples accounting for petty cash. How the imprest system of petty cash book works your business. Petty cash book format example definition explanation. At the end of an accounting period a count of the petty cash shows that the fund contains cash of 240 and expense vouchers for supplies of 40. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. Petty cash vouchers are also referred to as petty cash receipts and can be purchased from office supply stores. Petty cash book definition, types, format, examples. May 04, 2017 8 free sample petty cash voucher templates by admin published may 4, 2017 updated may 4, 2017 for uncommon expenses that dont happen in regular routine, departments and divisions inside an organization have the facility to ask the finance department to issue some cash for general use. In other words, the amount lying with the petty cashier will never exceed imprest cash.
Payments in cash of small amounts like traveling expenses, postage, carriage etc. Accounting for petty cash explanation, related controls and. 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. Recording of transactions ii petty cash book solutions.
Understand how the imprest system works in the petty cash book. Every time a payment is made through petty cash, it is recorded in the petty cash register usually by the cashier. An imprest system is used to run and manage a petty cash fund. Manage your business expenses anytime, anywhere with debitoor invoicing software. Guidance in this section applies to petty cash, imprest accounts, working funds, advance travel, stamp funds, change funds, or any other revolving funds set aside for facilitating minor disbursements, making change, and similar uses. As such, it has the responsibility and authority to establish procedures for petty cash and to enforce those procedures. The imprest system is used for petty cash book maintenance. Check your understanding of a petty cash fund in this worksheet and quiz. An imprest account is used for handling minor disbursements whereby a fixed amount of money is set aside for this purpose. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book.
Purpose restrictions guidelines and procedures process. Suppose a business wants to implement an imprest petty cash system and establish a fixed petty cash fund of 100 at the start of an accounting period. 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. It is recorded in a separated chart account which enables to reconcile daily between accounting record and logbook. Disbursements are made as needed with a receipt or petty cash voucher being completed in each case. Second, a check is written for this amount, and the cash is given to the cashier in charge of the 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. At the end of each month when the petty cashier approaches the main cashier for reimbursement, the latter cashier prepares a cheque voucher in which he lists the total of various payment analysis columns of the petty cash book. Petty cash policy imprest fund the cashiers office is responsible for overseeing the administration of all petty cash funds throughout the college. Petty cash book is the cash book which involves small cash payment and receipt during daily business operation. Typically, it may also contain the so many expense columns in the credit side of the cash book to record expenses.
Petty cash book 2019, imprest system of petty cash advantages. Sep 30, 2019 is the petty cash box a help or a hindrance. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. By watching this video you will understand how to record all the entries in the petty cash voucher receipt book. The petty cashier of john and james company paid cash for the following expenditures during march 2018. Always the voucher would show the amount, purpose, recipient, general ledger account number and date relating to the expenses. Petty cash is an easy to understand and familiar method of paying for company expenses. Petty cash and the imprest cash float system college. Nov 08, 2019 petty cash replenishment refers to the process of restoring the cash balance in the petty cash fund back to its original imprest amount. Imprest, petty cash and other revolving funds office of the. May 18, 2015 this video describes how to set up a petty cash fund and how to reimburse it once it has been used. The petty cash book is maintained by separate cashier known as petty cashier.
Tweet petty cash and the imprest cash float system petty cash many business normally keeps a small amount of money to meet some small cash disbursements like payment of postage, medical claims, staff traveling claims. The imprest system is an accounting system designed to track and document how cash is being spent. These petty cash expenses are recorded in the petty cash book. The most common imprest system is the petty cash system. An imprest system of petty cash is used for more control over cash in hand. This cheque is recorded on the payments side of the main cash book. The main advantages of imprest system of petty cash are as follows. Under this petty cash book system, a lump sum amount of cash money is given to the petty cashier.
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. Generally a columnar petty cash book is used in which different columns are provided for different petty expenses. Maintaining a cash book under the stated system is called an imprest petty cash book. Petty cash is the small cash reserves that businesses keep on the.
The amount of reimbursement is equal to the expenses paid through petty cash since the time of last reimbursement. Petty cash means the small amount that is allocated for the purpose of paying the small expenses which the company occurs in its day to day operations where it is unreasonable to issue the check and for managing the same custodians are appointed by the company. The most common example of an imprest system is the petty cash system. The cash would normally be drawn from the cash checking account, and the journal to post the imprest petty cash would be as follows. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. The petty cashier gets cash against the cheque from the bank and records the cheque in the receipts column of the petty cash book.
The importance of petty cash book imprest system is that it helps in basic bookkeeping. Recording of transaction in cash book and journal with specimen. Petty cash balance after reimbursement reverts to back to the level of the float. Definition of petty cash voucher a petty cash voucher is usually a small form that is used to document a disbursement payment from a petty cash fund. 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.
The most common definition of the term revolving fund is that it is an imprest account fund or petty cash fund. The amount of petty cash also known as the petty cash fund varies by company or organization. In this way the petty cashier will start every time with an amount equal to imprest cash. Nov 23, 2015 understand how the imprest system works in the petty cash book. 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. You can find the questionsanswerssolutions for the chapter 4 of cbse class 11 accountancy in this page. You may learn more about accounting basics from the following articles ledger account practical examples.
But the imprest petty cash book having a maintain their petty cash each month opening fund impresetly. 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. 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. The petty cash book is a book of vouchers which are made each time an expense is made from petty cash money. Recording of transactions ii petty cash book solutions this page contains the cbse accountancy class 11 chapter recording of transactions ii notes. These tools can be used to gauge your knowledge of what these funds can. 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 to have the separate record for each type of petty expenses. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. When a payment is to be made out of the petty cash fund, a petty cash voucher pcv is prepared by the petty cashier. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check.
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