The most common way of accounting for petty cash expenditures is to use the imprest system. Many expenses of small nature are recorded in petty cash book. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Under this time period, the cashier has to run the petty cash account under the given budget. There are two primary types of entries in the petty cash book, which are a debit to record cash received. Apr 29, 2020 such a system is known as the imprest system of petty cash.
What is imprest system in maintain petty cash book. 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. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount. Ledger for petty cash record keeping large 120 pages business accounts petty cash log book. The more scientific method of maintaining petty cash so for introduced into practice is theimprest system. Imprest account imprest system example the strategic cfo. This separation of cash books has many advantages of the firm like, all petty expenses are maintained separately. Cash the cheque and create your first petty cash fund. 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 cashier is responsible for updating and maintaining the petty cash book. The petty cash book is maintained by separate cashier known as petty cashier. How the imprest system of petty cash book works your business.
Petty cash book 2019, imprest system of petty cash. Recording of transactions ii petty cash book solutions. Apr 26, 2020 the petty cash book is a formal summarization of petty cash expenditures, sorted by date. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. As the disbursements are for petty item hence the name petty cash. Under this system a fixed sum of money is given to the petty cashier to cover the petty expenses for the month. During an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. The initial fund would be created by issuing a cheque for. The imprest system is a form of financial accounting system. Payments in cash of small amounts like traveling expenses, postage, carriage etc. Imprest petty cash question with answer college accounting. The main advantages of imprest system of petty cash are as follows.
Adams petty cash 2part carbonless receipts book, 2. 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. So this system is more systematic and easier for auditing as well. The imprest petty cash system is a method of accounting for petty cash expenses. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. Under the petty cash imprest system, the head cashier provides a fixed feasible amount depending on previous spend history to the petty cashier for a given period. The cashier makes payment out of the amount granted to him. A fixed sum is advanced at the beginning of every month. 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 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.
Petty cash book is maintained by the petty cashier and act as the petty cash book petty cash book 3. At the end of the period a petty cash reconciliation is carried out. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. The additional analysis columns are used to analyze expenditures as they arise.
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. Start maintaining a general ledger in which to keep track of the petty cash and pettycash. Notes on systems of petty cash fund grade 10 accountancy. 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 surplus amount himself. This page contains the cbse accountancy class 11 chapter recording of transactions ii notes.
Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. 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. Understand how the imprest system works in the petty cash book. Imprest system petty cash book in this system, the petty cashier is entrusted with a specified amount at the beginning of every month, fortnight or week. Thus, the book is part of a manual recordkeeping system.
Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established. In most cases, the petty cash book is an actual ledger book, rather than a computer record. What are the advantages of using the imprest system. 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. The system is a form of managing petty cash in a business. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds. The controllers office shall take the necessary steps to effect the name change on the university financial system. Balancing period the petty cashier is given fresh cheque of the amount equal to his payments during the same period. 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. Cash book, pass book, bank reconciliation statement dr. Petty cash is the small cash reserves that businesses keep on the.
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. Imprest system of petty cash book the amount which the main cashier hands over to the petty cashier in order to meet the petty cash expenses of a given period is known as. It is the book which is used for the purpose of recording expenses involving small amounts. Recording all of these transactions in the cash book can get to be very tedious and cumbersome. Jun 14, 2008 an imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount. Petty cash funds, referred to as imprest funds in minnesotas statutes, are authorized for school districts, towns, counties, and cities. 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 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.
By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. 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 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. Jssmst locking large metal cash box with money tray, money box with combination lock, black. 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. Petty cash book maintains records of all petty payments systematically.
Explain how the imprest system of petty cash book works. Under imprest, petty cash book system petty cashier submits a statement of expenditure to the head cashier at an interval of a certain period and thereafter receives funds from him for further expenses. At the end of the fixed period or earlier, when petty cashier needs further cash, he submits the petty cash book, along with vouchers. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. So is the case if you are looking for cbse class 11 commerce related topic.
It can be either a week or a month depending on the volume of transactions. The system is very useful specially if an analytical petty cash book is used. With an imprest system, accountants or bookkeepers track petty cash in the petty cash book. You can find the questionsanswerssolutions for the chapter 4 of cbse class 11 accountancy in this page. These small cash payments are recorded in a separate book, known as a petty cash book. 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. 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 bookkeeper records the amount allocated to the petty cash fund in the petty cash book, which. Nov 23, 2015 understand how the imprest system works in the petty cash book. The analytical petty cash book and the imprest system. From the following particulars prepare a petty cash book under imprest system. Petty cash imprest sortmybooks helpdesk updated march 31, 2019 15. This system is generally followed by most of the business concerns. A fixed sum is advanced as and when the previous advance is spent.
A fixed balance is maintained in the account, and it is replenished routinely to maintain that. Petty cash book format example definition explanation. How the imprest system of petty cash book works your. Nov 27, 2019 the imprest petty cash system is a method of accounting for petty cash expenses.
These petty cash expenses are recorded in the petty cash book. What is the difference between an imprest and nonimprest. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Download petty cash book excel template exceldatapro. The attached article explains best practice for this. The journal entry to replenish an imprest petty cash fund involves debiting each of the expenses involved and crediting cash not petty cash for the amount necessary to get the actual cash on hand equal to. Meaning of petty cash book, its importance and advantages.
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 and the imprest cash float system college. The main advantages of petty cash book publish your article. A fixed sum is advanced at the beginning of the period. 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. In a business operating this type of cash book, small cash payments are usually made out of petty cash. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. The petty cash book is a formal summarization of petty cash expenditures, sorted by date.
Download petty cash book in excel file in xlsx format. The most common imprest system is the petty cash system. The cash book and 8 the petty cash book ethaksalawa. 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. 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. Kuda maposa maintains a petty cash book using the imprest system.
An imprest system is used to run and manage a petty cash fund. Start maintaining a general ledger in which to keep track of the petty cash and petty cash. Recording of transactions ii petty cash book solutions this page contains the cbse accountancy class 11 chapter recording of transactions ii notes. If you havent set aside money into petty cash imprest is lending money to. Petty cash books will allow us to easily compare and efficiently control petty expenses. The firm may adopt imprest system of maintaining petty cash. Due to the fact that these are cash funds currency in the form of coins and bills, extra security precautions should be taken to safeguard these funds. This is recorded as a separate account in the companys. 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 2019, imprest system of petty cash advantages. Imprest system of petty cash fund the world impress means advance amount which is personal to certain person to make petty expenses. Chances for mistakes are reduced since the chief cashier regularly. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system. It should also be kept in mind that petty cash book is not like the cash book. Setting up a petty cash system is pretty straightforward and can be accomplished in eight easy steps. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. The petty cashier spends the money under the given budget. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. Differences between main cash book and petty cash book 1.
By watching this video you will understand how to record all the entries in. An imprest is a cash account that a business uses to pay for small, routine expenses. This can be handled by a junior member of the staff, making it. This can be handled by a junior member of the staff, making it simpler for management. A business has various sources of cash as well as different ways of.