Imprest system is a type of financial accounting system that is designed for tracking and documenting how cash has been utilized. Understand how the imprest system works in the petty cash book. Whether you decide to make a petty cash form or an actual book, the steps would be the same and the outcome would result in how well you manage the whole system. Philo is in business and keeps his petty cash on the imprest.
Under the petty cash imprest system, the petty cashier amount is fixed for a given period under which is usually under a month or a week. Under this system a fixed sum of money is given to the petty cashier to cover the petty expenses for the month. This period could be a week, a month or even sometimes a day. Topics covered in this video petty cash book imprest system numerical question 16 download notes and worksheet. Petty cash book definition, types, format, examples. The petty cash system is a straightforward and userfriendly method that enables the replenishment of all the expenditures. 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. The bookkeeper records the amount allocated to the petty cash fund in. Under imprest system of petty cash book, a round sum of money is estimated as necessary for the possible needs of the business to meet the petty expenses for the week or fortnight is handed over to the petty cashier.
The petty cashier entered the transactions in the petty cash book for the first week of february 2016 in the total column of the petty cash book. Subscribe to our youtube channel so as not to miss a tutorial video. If small cash payments are initially recorded in a petty cash book, rather than being recorded directly into the general ledger, there will be. 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. It will be difficult to manage the cash book with all these small entries.
Here the petty cashier is given a lump sum amount of money at the beginning of the accounting period. Currency and coin 2,000 postage 1,000 supplies 3,000 transportation 2,500 miscellaneous expense 1,500 june 30 the. From the following information, show how his petty cash book would appear for the week ended 12th september, 2017. At the end of the fixed period or earlier, when petty cashier needs further cash, he submits the petty cash book, along with. The method of dealing with petty cash transactions is known as the imprest system. Total payments are shown on the right hand side of the petty cash book. 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 amount of petty cash will increase when it is debited with additional cash and will decrease when expenses incurred. Petty cash book explanation, format, example, ordinary and. Jul 24, 2018 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 imprest and ordinary petty cash systems. Petty cash book is maintained by petty cashier and acts as the petty cash account. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Petty cash book meaning, types, examples, and faqs.
Accounting for petty cash explanation, related controls and. The second system of petty cash is the imprest system. Petty cash book explanation, format, example, ordinary. These small expenditures are usually paid using coins and currency notes rather than checks. 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.
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. Nov 26, 2018 sri r maintains a columnar petty cash book on the imprest system. The most general imprest system is the petty cash system. Beside petty expenses, rece ipts from main cash are recorded. With an imprest system, accountants or bookkeepers track petty cash in the petty cash book. The aforesaid system can help an organization in numerous ways. Required a state one advantage of the imprest system of petty cash. The books of lynx company which closes its book annually on june 30, 2018, contain the following information. Petty cash book meaning, types, examples, and faqs vedantu. How the imprest system of petty cash book works your.
Under this system a fixed sum of money is given to the. Chapter 11 petty cash book and imprest system a business may have a large number of small value payments which it has to incur on a daily basis. Petty cash book is a manual system of recording expenditure and is often prone to errors and sometimes becomes a cumbersome task to keep the books and record each transaction, especially in a big company. In short, imprest petty cash book is design to meet daytoday expenditures. A petty cashier of mugirango traders operates his petty cash book on an. The bookkeeper records the amount allocated to the petty cash fund in the petty cash book, which. 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. Petty cash is to remain dormant at a constant amount. The petty cash account is a widely used imprest system where nominal expenditures are recorded. Required c i state the amount of cash there should have been in the petty cash box.
Using this float the petty cashier would incur the expenses during the month. When you are thinking to make petty cash book for your business. The imprest system is used for petty cash book maintenance. Under imprest system, advance money is given to petty cashier. Such payments are generally handled by a petty cash imprest system whereby an amount of float is fixed. The fixed amount of cash which the chief cashier handed over to the petty cashier for meeting petty expenses for a specified period of time is know as imprest or float. This video is a part of the series for cbse class 11, accounts demo videos for chapter cash book. If a business uses the imprest system, it will create an imprest. Petty cash book may be maintained by the ordinary system or by imprest system. This occurs with an imprest petty cash system and an imprest payroll account. The more scientific method of maintaining petty cash so for introduced into practice is the imprest system. Petty cash imprest funds by law, school districts, towns, counties, and cities are allowed to establish petty cash imprest funds.
Recording of transactions ii petty cash book solutions. This is the maximum amount of cash that can be held at any time. By watching this video you will understand how to record all the entries in the petty cash vo. Petty cash book explanation, format, example, ordinary and imprest. Under this system, total petty expenses for a particular period. The imprest system is an accounting system designed to track and document how cash is being spent. Jan 05, 2020 petty cash book is the book which is used for the purpose of recording expenses involving small amounts. Thereby the possibility of fraud and forgery is removed and there remains. The petty cashier is supplied with a fixed sum of money which is sufficient to cover the petty payments for a stated period such as a month or a week, when the petty cash book is opened. Imprest system of petty cash book imprest means money advanced on loan. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the petty cashier in advance for meeting expenditure of a particular period. For instance, a business estimates that a sum of rs 500 is required to meet small expenses in the business for one week.
What is the type of account and normal balance of petty cash. At the end of the period, the petty cashier submits to the head cashier a statement of expenditures incurred by him. Controllimitkeep track of petty cash expenditure the cash remaining and the vouchers received should equal the imprest can help to reduce fraud or other suitable advantage. Nov 27, 2019 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. In this system, the petty cashier is entrusted with a specified amount at the beginning of every month, fortnight or week. The imprest system of petty cash means the general ledger account. 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. Mar 24, 2021 such a cash book maintained by the petty cashier is called a petty cash book. Petty cash book with imprest system simple and tabular forms. Ts grewal accountancy class 11 solutions chapter 7 special. Businesses want a system to serve as a control over the recording of payments of frequently occurring items. The analytical petty cash book and the imprest system quiz.
The basis of accounting lies in the three main accounting terms and accounts, which comprise the journal, ledger, and the petty cash book. If a business uses the imprest system, it will create an imprest account to p. Imprest system of petty cash book is system in which head cashier first estimates the total petty expenses of a particular period say month or fortnight and estimated amount is given to petty cashier in advance to meet petty expenses of particular period. 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. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Petty cash book and imprest system of 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. The most common example of an imprest system is the petty cash system. Balancing period the petty cashier is given fresh cheque of the amount equal to his payments during the same period. What is imprest system in maintain petty cash book. Prepare petty cash book from the following transactions. A petty cash imprest system allows only the replenishment of the spend made. From the following information prepare an analytical petty. Dec 17, 2020 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. At the week end or earlier, the petty cashier spent rs 480 and needs more cash. 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. Accounting mcqs for preparation of various test announced by fpsc, kppsc, nts, ppsc.
The petty cash book usually consists of a columnar book with one side used to record the original receipt of cash to establish the fund, and the other to analyse payments by expense categories, such as postage and stationery used in the above example. How the imprest system of petty cash book works azcentral. The normal opening balance of cash will be placed on the left hand side under cash receipts column. At the end of the fixed period or earlier, when petty cashier needs further cash, he submits the petty cash book, along with vouchers. Each time cash level runs low, the petty cash imprest is injected with cash by drawing a cheque. Petty cash book follows the imprest system of accounting.
The main advantages of imprest system of petty cash are as follows. Petty cash book with imprest system simple and tabular. Chapter 11 petty cash book and imprest system accounting tuition. However, to overcome this these days, many companies are scrapping the old system of bookkeeping. Sep 16, 2020 enter the following transactions in iyyappans petty cash book with analytical columns under imprest system. Imprest system meaning, how it works for petty cash. The petty cashier spends the imprest cash during the period. Chapter 11 petty cash book and imprest system accounting. Under imprest system, a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists. Petty cash book imprest system questions and answers. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. A petty cash book is used to record small cash payments made by the business.
In most cases, imprest systems are used to account for petty cash a small amount of. Philo is in business and keeps his petty cash on the. Petty cash book aoc this article covers the terminologies in the petty cash book system of accounting, the definition of terms and the analysis of payments. Operation of the petty cash bookdetermine the operation of the petty cash book petty cash book. Recording of transactions ii petty cash book solutions eduxir.
The head cashier before funding again examines the previous expenses. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Most common example include petty cash system that accounts each and every petty cash transactions to maintain an equilibrium in the fund that is equal to the total of petty cash receipts and additional cash that is left in the fund. The analytical petty cash book and the imprest system. Currency and coin 2,000 postage 1,000 supplies 3,000 transportation 2,500 miscellaneous expense 1,500 june 30 the fund was not replenished. In a business operating this type of cash book, small cash payments are usually made out of petty cash.
Petty cash book format example definition explanation. Under this system, total petty expenses for a particular period are estimated and the amount is advanced to the petty cashier. How the imprest system of petty cash book works your business. Under this system, a round sum of money estimated as necessary for the possible needs of the business to meet petty. 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. May 2 the company established an imprest fund of p10,000. At the end of the period, petty cashier submits the statements of petty expenditure to the chief cashier. Petty cash bookmeaning, advantages, format, example. These mcqs are very helpful for the preparation of various posts of senior auditor. Oct 15, 2020 the cashier who handles the petty expenses and petty cash book is known as petty cashier.
When the account goes below a certain specified amount, the system is replenished. As you know, petty cash is accounting book usually contains the expenses which are small and little value. Under this system, an estimate is made of the amount required for petty expenses for a period say a week, a. Petty cash book is the book which is used for the purpose of recording expenses involving small amounts. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. This method is a structure of financial accounting system. 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.
An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant. Download petty cash book excel template exceldatapro. The people in charge of the fund replenish the account with the same amount that was spent. Petty cash book in accounting meaning of accounting in. These small cash payments are recorded in a separate book, known as a petty cash book. This system is known as imprest system of petty cash book. The person appointed to carry out the duties of handling and recording the petty cash is usually a junior member of staff known as the petty cashier.
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