Commission of fraud is reduced as the chief cashier verifies petty cash book along. This is recorded as a separate account in the companys. Such payments are generally handled by a petty cash imprest system whereby an amount of float is fixed. From the following particulars prepare a petty cash book under imprest system. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. Characteristics of the imprest petty cash system are. 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. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. So, if you start the month with 100 in your petty cash float and spend 90 of that cash in the month, an amount of 90 will be then placed in your petty cash float to. 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. The float is fixed but will always be made up of petty cash in hand or vouchers paid. Sep 30, 2019 petty cash is an easy to understand and familiar method of paying for company expenses. In a non imprest system where a fixed amount is issued every month, e. Petty cash or the petty cash fund is a small amount of cash on hand used for paying expenses too small to merit writing a check.
Such a system is known as the imprest system of pettycash. A constant or unchanging amount that is often used when referring to petty cash. Petty cash book explanation, format, example, ordinary. An advance or a loan of funds, especially for services rendered to a government. What are the importance of petty cash imprest system answers. The main advantages of imprest system of petty cash are as follows. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. 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. This is the maximum amount of cash that can be held at any time. The most common imprest system is the petty cash system. 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. Feb 15, 2019 this video is a part of the series for cbse class 11, accounts demo videos for chapter cash book.
What is the petty cash imprest system, and why would a. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. At least once a month the float is balanced and reimbursed. 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. Petty cash imprest funds and reimbursements petty cash. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Petty cash book may be maintained by the ordinary system or by imprest. Petty cash book can be maintained either in a simple or in analytical way. An imprest is a cash account that a business uses to pay for small, routine expenses. Understand how the imprest system works in the petty cash book.
Beside petty expenses, receipts from main cash are recorded. Petty cash book is maintained by petty cashier and acts as the petty cash account. When a business doesnt provide access to company credit cards, or employees would rather not wait to be reimbursed for purchases, using petty cash is a simple alternative. How the imprest system of petty cash book works your. As the disbursements are for petty item hence the name petty cash. 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. The imprest system is used for petty cash book maintenance. When the whole amount of petty cash is spent, the petty cashier submits the account to chief cashier who again pays a lumpsum amount to petty cashier. Petty cash book with imprest system simple and tabular. During an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. Petty cash book format example definition explanation. 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. Documentation requiredkeep all dockets andor receipts for petty cash expenses as proof of payment made out of imprest. An imprest system of petty cash is used for more control over cash in hand.
The system is a form of managing petty cash in a business. 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. Petty cash book is maintained by the petty cashier. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and. When the account goes below a certain specified amount, the system is replenished.
Imprest meaning in the cambridge english dictionary. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. 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. Under this system, the petty cashier is given a lumpsum amount for meeting petty expenses. The importance of petty cash book imprest system is that it helps in basic bookkeeping. Nov 27, 2019 the imprest petty cash system is a method of accounting for petty cash expenses. Petty cash book is a kind of cash book which records large number of small payments such as conveyance, cartage, postage, telegrams and other expenses under the imprest system. Petty cash book 2019, imprest system of petty cash.
Meaning of petty cash book, its importance and advantages. An imprest system is used to run and manage a petty cash fund. The amount so ascertained is given to the petty cashier in. At the end of the period, the cashier submits the report and the amount spent by him is reimbursed so 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. This type of book is maintained just like a cash book. The petty cash imprest system allows only the replenishment of the spend made. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. An imprest system is a method to account for petty cash by. Accounting for petty cash explanation, related controls. However, since cash is the most liquid resource of the entity, strong controls over it are necessary to avoid possible misappropriation. Overall, petty cash is a largely outdated and inefficient system.
Accounting for petty cash explanation, related controls and. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Petty cash imprest system is an effective way to manage small day to day expenses. There might be a petty cash drawer or box in each department for. 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. Petty cash imprest funds are provided to enable departments to make cash conveniently available for minor business expenditures. Apr 19, 2017 in a non imprest system where a fixed amount is issued every month, e. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the.
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. 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 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. In this series, we have completed all the concepts, examples and the entire ncert exercises. Imprest system meaning in the cambridge english dictionary. The system is very useful specially if an analytical petty cash book is used. Each time cash level runs low, the petty cash imprest is injected with cash by drawing a cheque. 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. While convenient for small purchases, it is not a realistic solution for larger expenses. Petty cash book definition, types, format, examples. Under this time period, the cashier has to run the petty cash account under the given budget. 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. 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.
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. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. How the imprest system of petty cash book works your business. The various columns are totalled to show the reason for making payments, and then the. Apr 29, 2020 such a system is known as the imprest system of petty cash. Using imprest, the petty cash of a company is kept at a constant rate. It may be maintained by ordinary or by the imprest system. This can be handled by a junior member of the staff, making it simpler for management. A petty cash voucher is used to record money claimed and subsequently paid out. Characteristics of the imprest petty cash system are course. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. This type of cash book usually uses the imprest system.
In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. Petty cash is the small cash reserves that businesses keep on the. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. 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 amount of reimbursement is equal to the expenses paid through 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. Petty cash book 2019, imprest system of petty cash advantages. The preferred method of reimbursements is by check, requested via a properly authorized and documented check request. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. Imprest account is maintained for the entry of the petty expensese which ultimately known as clewar explanation of petty expenses and these expenses will be entered in the analytical petty cash book under imprest system.
The imprest petty cash system is a method of accounting for petty cash expenses. Under this system, an estimate is made of the amount required for petty expenses for a period say a week, a fortnight, or a month. 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. Petty cash book is the book which is used for the purpose of recording expenses involving small amounts. Imprest system petty cash book archives tutorstips. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. Petty cash and the imprest cash float system college. At the end of the period a petty cash reconciliation is carried out. This video is a part of the series for cbse class 11, accounts demo videos for chapter cash book.
Under this system, the total petty expenses for a particular period are estimated and that amount is advanced by the head cashier to the petty cashier. What are the advantages of a imprest system for petty cash. The book has one column to record receipt of cash which is only from the main cashier and other columns to. Petty cash book with imprest system simple and tabular forms. The imprest system is a form of financial accounting system. What are the advantages of using the imprest system. Petty cash book explanation, format, example, ordinary and. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. 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. This makes the entire petty cash system susceptible to abuse or fraud. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below.
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