Petty cash book explanation, format, example, ordinary and imprest. An imprest system is a method to account for petty cash by. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. What are the importance of petty cash imprest system answers. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established. Petty cash is a convenient way to pay for expenses such as stamps and emergency purchases too small to pay for with a business check. The most wellknown type of imprest is a petty cash account, which is used to cover smaller transactions. The petty cashier reimburses the claimant using money from the petty cash box. Although you can fund a petty cash account in any amount. The main purpose of giving out these past questions on financial account is to help prepare students who has registered for the waec gce exam. Under the imprest system, the head cashier makes the reimbursement of the amount spent by the petty cashier but under non imprest system, the head cashier may handover the cash to the petty cashier equal tomore thanless than the amount. Cash funds counted by the department of internal audit sometimes exceeded or were less than the amounts listed in the cfws general ledger.
Check this new syllabus to the course scheme for the theory and practical assessment. The most common example of an imprest system is the petty cash system. In case of ordinary system of petty cash, the petty cashier is given a certain amount of cash and after spending the whole of that amount, he submits the accounts to the head cashier. Complete the following to explain how an imprest petty cash system works. One key component of the system is the need for documentation of all expenditures, which provides an excellent means of maintaining tight control over cash. His transactions for the month of september 2007 were. Cash 170 petty cash 170 to decrease the petty cash fund to. Manage your business expenses anytime, anywhere with debitoor invoicing software. Under imprest, petty cash book system petty expenses are recorded in chronological order of dates. How petty cash imprest system works the imprest system ensures that you must document how the petty cash is spent. Understand how the imprest system works in the petty cash book. Petty cash book may be maintained by ordinary system or by imprest system. Many of the companies that still use petty cash use the imprest system for tracking and record usage and replenishment in a petty cash book. In an imprest petty cash system the petty cash fund is maintained at a fixed sum.
In most cases, the petty cash book is an actual ledger book, rather than a computer record. Petty cash is the small cash reserves that businesses keep on the. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal expenditures of the business which is not related to the direct line. Explain how an imprest petty cash system works journalize establishment of the petty cash fund on march 1 and replenishment of the fund on march 31. 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 azcentral. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. A fixed amount of cash is allocated to a petty cash fund, which is stated in a separate account in the general ledger. 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. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. The most common example of an imprest system is the petty. Explain how the imprest system of petty cash book works. The imprest system is an accounting system for paying out and subsequently replenishing petty cash.
There are two primary types of entries in the petty cash b. The petty cash account is used to make small purchases. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. Under both the systems ie imprest and non imprest the.
The amount of petty cash also known as the petty cash fund varies by company or organization. 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. In an imprest system, the amount requested is documented. An imprest system of petty cash means that the general ledgeraccount petty cash will remain set at a given amount. If a business uses the imprest system, it will create an imprest account to pay for small, routine, or incidental expenses.
First, management has to estimate how many small purchases it will make and much money it will need for these purchases. The entries in sara iqbals petty cash book for february 2010 were as follows. 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. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Thus, the book is part of a manual recordkeeping system. Using the imprest system to calculate and top up petty cash reserves enables easy tracking of small expense claims and reduces the risk of fraud because when petty cash expenditure is added to the remaining cash in the cash box the total should always equal. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book.
Under this system a fixed sum of money is given to the petty cashier to cover the petty expenses for the month. An imprest system is used to run and manage a petty cash fund. Petty cash imprest system is an effective way to manage small day to day expenses. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to the. In almost all businesses, it is found necessary to keep small sums of ready money with thecashier or petty cashier for the purpose of meeting small expenses such as. What is the difference between an imprest and non imprest petty cash account. How the imprest system of petty cash book works your. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. However, since cash is the most liquid resource of the entity, strong controls over it are necessary to avoid possible misappropriation.
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. Aslong as set amount is adequate for the small disbursements, there will be no entry in general ledger account petty cash. 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. As small purchases use petty cash, all the receipts are saved and recorded. Under this system, the total petty expenses for a particular period are estimated and that. This system makes it easier to monitor expenses, flag discrepancies, and ultimately detect fraud. 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. E717 requirement 1 maintaining the petty cash account at its designated balance is the nature of an imprest system. When the amount gets low, the pettycash custodian will request a check to replenish the amountthat was disbursed. Accounting for petty cash explanation, related controls. This video shows the creation and replenishment of 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 of petty cash is used by most of the companies because of the following advantages. To account for petty cash, create a transaction log that covers the date, the person who used the petty cash, a description of the transaction, and any other deposits or expenses.
Sara iqbal petty cash book total received date details total paid office expenses travelling expenses cleaning ledger accounts. Petty cash is money that is reserved for small expenses where payment by cheque or debit card would prove inappropriate or timeconsuming. The petty cashier makes the small payments and records them in the petty cash book. Read this article to learn about the meaning and preparation of analytical and imprest system of petty cash book. How does the imprest system of petty cash book work. Generally, petty cash book is maintained on imprest system. Required a explain what is meant by the imprest system in relation to petty cash books. Hals place night club maintains an imprest petty cash. Imprest petty cash system works on the principle that at any point of time, the petty cash box contains cash and petty cash tickets that total the amount of the imprest balance. After a certain period, the amount of total expenses is sorted out and the amount of every head of expenditure is totaled separately. Like a general cash book, a petty cash book has a debit and a credit side. The imprest system is a form of financial accounting system.
Under this system an estimate is made of the amount required for small payments for a certain period, say, a week or a month and this amount is paid to the petty cashier in advance. Under this time period, the cashier has to run the petty cash account under the given budget. The imprest system requires that, at any point in time, the petty cash box contains cash and receipts that total the amount of the imprest balance. Imprest and non imprest, the petty cashier submits the petty cash book to the head cashier who examines the petty cash book. The imprest petty cash system is a method of accounting for petty cash expenses. 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 petty cashier should record the details of the transaction in the petty cash book and then store the petty cash book, petty cash box, vouchers and receipts in a lockable cabinet. So, at all times, you can check how much should be left in. Youll also want to purchase a lock box for the cash and receipts. The petty cash book is not part of the double entry bookkeeping system. Please help improve it or discuss these issues on the talk page. At the end of the period, the cashier submits the report and the amount spent by him is reimbursed so that.
In a petty cash system, petty cash dockets are written for each amount issued. An imprest system is an accounting system that involves monitoring and managing petty cash payouts and subsequent replenishment. The most common imprest system is the petty cash system. This clearly identifies the amount of cash for which the custodian is responsible, and it is the system. When the account goes below a certain specified amount, the system is replenished. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below. The people in charge of the fund replenish the account with the same amount that was spent. The imprest system is an accounting system designed to track and document how cash is being spent. The imprest system reduces the chances of misuse of cash because the float can be immediately reduced if it is found to be more than adequate for the agreed period. Petty cash book format example definition explanation. Sara iqbal maintains a petty cash book using the imprest system. The petty cash book is a formal summarization of petty cash expenditures, sorted by date.
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