The bigger the company, the harder it is to track outgoing petty cash, change and receipts. A petty cash book records petty payments made in each department by the petty cashiers. Cash includes currency and coins, although most businesses do not keep much of this type of cash around. Less transactions are entered in the main cash book making it less cluttered with only monthly totals transferred to the general ledger. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. When petty cash is easy to get to employees, it is a suitable way to pay for little purchases. What are the advantages of a imprest system for petty cash answers. Petty cash book is maintained by petty cashier and acts as the petty cash account. Petty cash book and imprest system foreign educator. Petty cash book and advantages of imprest system youtube. Imprest system is the most popular way of keeping the petty cash book.
In the petty cash book not part of the double entry bookkeeping system, the cash received to replenish the fund of 65 is recorded and the imprest fund is now back to its original cash amount of 100. Advantages of imprest system of petty cash youtube. Here the petty cashier is given a lump sum amount of money at the beginning of the accounting period. Serendeputy is a newsfeed engine for the open web, creating your newsfeed from tweeters, topics and sites you follow. Imprest system of petty cash book imprest means money advanced on loan. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. It should also be kept in mind that petty cash book is a branch of cash book. Petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc. 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. Advantages, disadvantages, and the pex alternative.
In a business operating this type of cash book, small cash payments are usually made out of petty cash. Petty cash book is the book which is used for the purpose of recording expenses involving small amounts. Under the imprest system, the chief cashier replenishes the cash such that the petty cash box always has the same amount. Petty cash book and advantages of imprest system duration. A separate column is allotted for each type of expenditure. Under this time period, the cashier has to run the petty cash account under the given budget.
How the imprest system of petty cash book works your. Using imprest, the petty cash of a company is kept at a constant rate. Under this method, the amount essential to assemble out various petty operating costs is estimated and given to the petty cashier at the beginning of. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. Please like, share and subscribe the content for more high quality videos. There are three main advantages of using a petty cash book. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. Learn more about petty cash expense management, and decide which system is right for your business. The cash book can be maintained properly as petty transactions are maintained separately. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident.
As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. These small cash payments are recorded in a separate book, known as a petty cash book. Allows chief cashier to controllimitkeep track of petty cash. The imprest system of petty cash is used by most of the companies because of the following advantages. Also included as a part of cash are the balances kept at banking and financial institutions. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Petty cash book explanation, format, example, ordinary and imprest. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. The chief cashier is relieved from the cumbersome work of petty cash disbursement. The daily transactions that use the petty cash are. The imprest system reduces the chances of misuse of cash because the float can be immediately reduced if it is found to. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used.
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. The petty cash book is maintained by separate cashier known as petty cashier. Payments in cash of small amounts like traveling expenses, postage, carriage etc. In a imprest system, a cashier is provided a small amount to meet the petty expenses of a given period and is authorized to make such payments. Since this task can be carried out by a junior member of staff it saves the. Many expenses of small nature are recorded in petty cash book. This makes the entire petty cash system susceptible to abuse. Petty cash is a comprehensible and common method of paying for business operating cost. Payments in cash of small amounts like traveling expenses, postage, carriage etc are petty cash expenses, petty cash expenses are recorded. What are the advantages of maintaining a petty cash book. Read on for more information on petty cash book advantages, format, systems, and example.
The advantages of analytical petty cash book are given below. It is a system where a reimbursement is made of the total amount paid in a period or it can also be called as a system where petty cashier begin each new accounting period with the same amount of petty cash. The second system of petty cash is the imprest system. In large business concerns, the petty cash book is maintained in columnar or analytical form, with a separate column for each usual item of expense and a column for. The main advantages of petty cash book publish your article. The petty cashier is the only one who is authorised for payment of cash vouchers.
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. Overall, petty cash is a largely outdated and inefficient system. This makes the entire petty cash system susceptible to abuse or fraud. The firm may adopt imprest system of maintaining petty cash. It should also be kept in mind that petty cash book is not like the cash book. Marks the advantages of using the imprest system are. The amount of petty cash also known as the petty cash fund varies by company or organization. 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 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 resources of. 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.
The imprest system is an accounting system for paying out and subsequently replenishing petty cash. Advantages and disadvantages of analytical petty cash book. The head cashier before funding again examines the. The most general imprest system is the petty cash system. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. The most common imprest system is the petty cash system. Meaning of petty cash book and advantages of keeping petty. The system is a form of managing petty cash in a business. The various columns are totalled to show the reason for making payments, and then the.
What are the advantages of a imprest system for petty cash. The difference between the total of the debit items and that of the total column on the credit represents the balance of the petty cash in hand. The advantages of petty cash system enumerated are as follows. This method is a structure of financial accounting system. Read this article to learn about the meaning and preparation of analytical and imprest system of petty cash book. 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. For all detailed video solutions of ts grewal questions of xi and xii accountancy please keep visiting this channel. Outline the advantages of the imprest system as a system. While convenient for small purchases, it is not a realistic solution for larger expenses. Advantages of imprest system the petty cashier cannot draw as and when he likes, it prevents unnecessary accumulation of cash in his hand thus the chances of defalcation of cash are minimized. Beside petty expenses, receipts from main cash are recorded. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to the. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. Petty cash book definition, types, format, examples.
Petty cash book with imprest system simple and tabular. At the end of the period, let say, a month, an amount equal to the amount he has spent is given back to the cashier to restore his cash at hand to the original amount held. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash. This period could be a week, a month or even sometimes a day. The amount of the imprest should be as low as possible and the number of floats in use should be kept to a minimum. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. 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. 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.
Petty cash book format example definition explanation. Also, find out its uses and functions in any contemporary business setup. The main advantages of imprest system of petty cash are as follows. A petty cash book gives management a record of all the little. Here we discuss the format of petty cash book, types of petty cash systems. What is the different cash book and petty cash book. A petty cash book is used to record small cash payments made by the business.
The imprest system principles of accounts singapore. An imprest system of petty cash is used for more control over cash in hand. Person who maintains petty cash book is known as petty cashier and these small expenses are termed as petty expenses. The imprest system is a system for controlling petty cash. What are the advantages of the petty cash book answers. The person petty cashier is given an amount in advance of expenditure. At the end of the period, the cashier submits the report and the amount spent by him is reimbursed so that. Petty cash book are maintained under the imprest system that means that the petty cashier starts each period with same amount of money. By this system a specified amount known as float is left with the petty cashier for petty expenses. Petty cash book 2019, imprest system of petty cash. Imprest system meaning in the cambridge english dictionary. The analytical petty cash book and the imprest system springerlink. What are the advantages of using the imprest system.
A petty cashier is responsible to prepare and maintain the petty cash book. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. 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. To remove small cash payments from the main cash book. The petty cashier has liability not to expend the petty cash more than. The importance of petty cash book imprest system is that it helps in basic bookkeeping. The imprest system is a form of financial accounting system. 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. Fixed amount is paid to the petty cashier along with the imprest system.
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