An imprest system is used to run and manage a petty cash fund. Petty cash book 2019, imprest system of petty cash. Balancing period the petty cashier is given fresh cheque of the amount equal to his payments during the same period. Meaning of petty cash book, its importance and advantages. A petty cash fund is a type of imprest account, which means that it contains a fixed amount of cash that is. 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 is maintained by the petty cashier and act as the petty cash book petty cash book 3. Imprest petty cash funds placed in the custody of responsible employees thus serve. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. What are the advantages of maintaining a 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 a form of financial accounting system. A fixed amount of cash is allocated to a petty cash fund, which is stated in a separate account in the general ledger. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well.
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. In this system, the petty cashier is entrusted with a specified amount at the beginning of every month, fortnight or week. Under this time period, the cashier has to run the petty cash account under the given budget. While convenient for small purchases, it is not a realistic solution for larger expenses.
The cashier makes payment out of the amount granted to him. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount. Petty cash book the cash book as seen above is used for recording all major payments. 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 shown in form 4. This makes the entire petty cash system susceptible to abuse or fraud. All cash distributions from the petty cash fund are documented with receipts. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds. The analytical petty cash book and the imprest system. An imprest is a cash account that a business uses to pay for small, routine expenses. Using imprest, the petty cash of a company is kept at a constant rate. Start maintaining a general ledger in which to keep track of the petty cash and pettycash. The initial fund would be created by issuing a cheque for. Under this system the petty cashier at first receives from the chief cashier a fixed sum of. The controllers office shall take the necessary steps to effect the name change on the university financial system.
The petty cashier is given a sum of money in the beginning of the period. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. Create a petty cash account and write out a cheque for the appropriate amount. We have been learning in class and for homework for the past 2 weeks how to draw up a petty cash book imprest. Petty cash book meaning, cash book vs petty cash book. 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. A fixed sum is advanced as and when the previous advance is spent. 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. This book guides you what information you need to take note of prior to the release of your offices petty cash. Petty cash log template and guide to using cash box. 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.
This can be handled by a junior member of the staff, making it. 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. The imprest system requires that, at any point in time, the petty cash box contains cash. Record this in your cash log in the cash out column and describe it as. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Just fill it out with whats required and make sure to get the responsible person to sign. 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. Sections e through i below describe actions designed to protect usnh. The additional analysis columns are used to analyze expenditures as they arise. The bookkeeper records the amount allocated to the petty cash fund in the petty cash book, which.
With an imprest system, accountants or bookkeepers track petty cash in the petty cash book. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. Understand how the imprest system works in the petty cash book. Under this system, a round sum of money estimated as necessary for the possible needs of the business to meet petty expenses for the week or fortnight is handed over to the petty cashier.
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. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. There are two primary types of entries in the petty cash book, which are a debit to record cash received. If you havent set aside money into petty cash imprest is lending money to. 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 imprest system is an accounting system for paying out and subsequently replenishing petty cash. It is an imprest system which means that it starts with a fixed amount, the.
Companies keep a small amount of cash on the premises in a. Cash the cheque and create your first petty cash fund. 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. Describe some of the internal controls that are implemented in the workplace. Overall, petty cash is a largely outdated and inefficient system.
What is the difference between an imprest and nonimprest. At the end of the period a petty cash reconciliation is carried out. The most common example of an imprest system is the petty. What would be the pros and cons of actually maintaining cash on premises for the petty cash system, versus a rechargeable debit card that. How the imprest system of petty cash book works azcentral. 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. 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. The imprest system is an accounting system designed to track and document how cash is being spent. 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.
Thus, the book in which small payments, which are not convenient to record in the main cash book, like postage, traveling expenses, purchase of stationery etc. You will also need to agree the maximum amount of money to be kept in the petty cash tin at any one time. 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 petty cash book is a formal summarization of petty cash expenditures, sorted by date. Payments are made and the fund is then replenished to the original amount. A fixed sum is advanced at the beginning of every month. 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.
The most common imprest system is the petty cash system. In an imprest petty cash system the petty cash fund is maintained at a fixed sum. As the disbursements are for petty item hence the name petty cash. At end the firm reimburses him the amount paid by him so that the balance of cash with him. 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.
In a business operating this type of cash book, small cash payments are usually made out of petty cash. 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. Such a system is known as the imprest system of pettycash. Petty cash and the imprest cash float system college. Setting up a petty cash system is pretty straightforward and can be accomplished in eight easy steps. Most companies set up a special fund called a petty cash fund for small purchases and office expenditures. Imprest system of petty cash fund the world impress means advance amount which is personal to certain person to make petty expenses. 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. What would be the pros and cons of actually maintaining cash on premises for the petty cash system, versus a. This is recorded as a separate account in the companys. Define the purpose and use of a petty cash fund, and prepare.
The imprest system many groups use an imprest system for their petty cash. A fixed sum is advanced at the beginning of the period. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. A fixed balance is maintained in the account, and it is replenished routinely to maintain that.
Here you will learn how to keep a petty cash log, when to use petty cash slips. 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 expenses keeping. Encourage responsibility and transparency in your office by keeping an updated petty cash receipt book. Totals are carried forward from page to page until the end of the periods. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund.
It is the book which is used for the purpose of recording expenses involving small amounts. For the month of april 20x9 her petty cash transactions were as. Explain how the imprest system of petty cash book works. What are the advantages of using the imprest system. However, consideration may be given to maintaining separate 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. 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.
The replenishment of the petty cash fund under an imprest system requires a debit to the petty cash account for the amount of the replenishment false if cash proves out short in a petty cash fund, the shortage is debited to the cash over and short account. 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. Petty cash book explanation, format, example, ordinary. Prepare a blank petty cash log utilizing a small book or you can use this free pdf template.
In most cases, the petty cash book is an actual ledger book, rather than a computer record. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. The system is a form of managing petty cash in a business. E8 17 requirement 1 maintaining the petty cash account at its. The imprest system is used for petty cash book maintenance. Petty cash book maintains records of all petty payments systematically. 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 is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. During the period he makes payment out of this money. Thus, the book is part of a manual record keeping system. 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. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. How the imprest system of petty cash book works your.
But, in every business a number of petty small payment like that for postage, carriage, stationery, entertainment, cartage, conveyance etc. The imprest petty cash system is a method of accounting for petty cash expenses. In accounting, an imprest system typically involves the management and monitoring of petty cash. Entries are recorded just like a ledger account with the help of.
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