During an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. This can be handled by a junior member of the staff, making it simpler for management. Dec 26, 2019 petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fare, fuel, etc. If you havent set aside money into petty cash imprest is lending money to. Petty cash book explanation, format, example, ordinary and. Apr 29, 2020 such a system is known as the imprest system of petty cash. Petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. Now lets learn to actually establish a good system where you will be able to use your log book. Imprest definition of imprest by the free dictionary. 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 petty cash system is a method of accounting for petty cash expenses. At end the firm reimburses him the amount paid by him so that the balance of cash with him. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount.
Guidance in this section applies to petty cash, imprest accounts, working funds, advance travel, stamp funds, change funds, or any other revolving funds set aside for facilitating minor disbursements, making change, and similar uses. This makes the entire petty cash system susceptible to abuse or fraud. Petty cash book is based on the division of labour and works on imprest system. 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. May 28, 2019 petty cash is a common form of imprest system i. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below. Overall, petty cash is a largely outdated and inefficient system.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. At the end of a period the petty cashier submits his statement of petty expenses to the chief cashier.
Understand how the imprest system works in the petty cash book. Imprest system of petty cash fund the world impress means advance amount which is personal to certain person to make petty expenses. 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. How does the imprest system of petty cash book work. You need to establish the maximum transaction amount to be handled through the petty cash system. When the account goes below a certain specified amount, the system is replenished. Recording of transactions in a petty cash book is easy. Commission of fraud is reduced as the chief cashier verifies petty cash book along.
An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. When you are thinking to make petty cash book for your business. How petty cash imprest system works the imprest system ensures that you must document how the petty cash is spent. As you know, petty cash is accounting book usually contains the expenses which are small and little value.
What are the importance of petty cash imprest system answers. The person responsible for spending petty cash and recording it in a petty cash book is known as petty cashier. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. The cash allocated for petty expenditures for a specific period is entered on the credit side of general cash book and on the debit side of petty cash book. Petty cash is not intended to replace or avoid accounting control of expenses. The petty cash voucher should provide space for the following. This is recorded as a separate account in the companys. Like columnar petty cash book, it also contains many money columns in the credit side and one money column in the debit side and a particular column and a date column are also similar to that of the columnar or analytical petty cash book.
From the following particulars prepare a petty cash book under imprest system. At the end of the period, the cashier submits the report and the amount spent by him is reimbursed so that. In short, imprest petty cash book is design to meet daytoday expenditures. 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. Sep 30, 2019 overall, petty cash is a largely outdated and inefficient system. During the period he makes payment out of this money. While convenient for small purchases, it is not a realistic solution for larger expenses. What are the advantages of using the imprest system. However, since cash is the most liquid resource of the entity, strong controls over it are necessary to avoid possible misappropriation. The system is a form of managing petty cash in a business. Mar 28, 2019 petty cash is not intended to replace or avoid accounting control of expenses. Accounting for petty cash explanation, related controls and.
Jun 14, 2008 an imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. The petty cash imprest system allows only the replenishment of the spend made. The petty cashier is given a sum of money in the beginning of the period. Using imprest, the petty cash of a company is kept at a constant rate. A petty cash voucher is usually a small form that is used to document a disbursement payment from a petty cash fund.
Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Nov 27, 2019 the imprest petty cash system is a method of accounting for petty cash expenses. Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fare, fuel, etc. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. An imprest system is used to run and manage a petty cash fund. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. The main advantages of imprest system of petty cash are as follows. Cash book could be a checking or other type of money access account.
Petty cash book is maintained by the petty cashier and act as the petty cash book petty cash book 3. Notes on systems of petty cash fund grade 10 accountancy. How the imprest system of petty cash book works your business. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. Petty cash is the small cash reserves that businesses keep on the. At the end of the period a petty cash reconciliation is carried out. Note the analysis columns that enable the transaction to be recorded and analysed at the same time. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Petty cash book format example definition explanation. Under imprest system, a fixed amount of money known as float. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. Nov 23, 2015 understand how the imprest system works in the petty cash book.
In a non imprest system where a fixed amount is issued every month, e. What is the difference between an imprest and nonimprest. 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. The petty cash voucher details are then entered in the petty cash book and the voucher filed away in numerical order so that it may be easily located if necessary. One of the famous principles of management is control by exception which means that if one person tries to control everything, he may end up controlling nothing.
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 designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. These small expenditures are usually paid using coins and currency notes rather than checks. 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. 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. An imprest system is a method of utilizing loans as prevention from illegal activity like fraud or theft what is the different cash book and petty cash book. It is the book which is used for the purpose of recording expenses involving small amounts.
Petty cash imprest system is an effective way to manage small day to day expenses. Petty cash book 2019, imprest system of petty cash advantages. So, if you start the month with 100 in your petty cash float and spend 90 of that cash in the month, an amount of 90 will be then placed in your petty cash float to. The importance of petty cash book imprest system is that it helps in basic bookkeeping. Under this system a fixed sum of money is given to the petty cashier to cover the petty expenses for the period.
Petty cash imprest system allows only the replenishment of the spend made. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established. So, if you start the month with 100 in your petty cash float and spend 90 of that cash in the month, an amount of 90 will be then placed in your petty cash float to bring the balance of your petty cash float back to 100. Person who maintains petty cash book is known as petty cashier and these small expenses are termed as petty expenses. Such a system is known as the imprest system of pettycash. Bars cash manual office of the washington state auditor. The daily transactions that use the petty cash are entered into this system which ensures that there is.
The system is very useful specially if an analytical petty cash book is used. The more scientific method of maintaining petty cash introduced into practice is the imprest system. 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. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. Apr 19, 2017 in a non imprest system where a fixed amount is issued every month, e. 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. Prepare a taccount for petty cash, and post to the account.
Petty cash book a petty cash book is shown on the next page. What is the petty cash imprest system, and why would a. Petty cash vouchers are also referred to as petty cash receipts and can be purchased from office supply stores. Petty cash book explanation, format, example, ordinary. Nov 22, 2019 petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc.