The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. The difference between petty cash and cash on hand. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Petty cash book definition, types, format, examples. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Fraud, internal control, and cash flashcards quizlet. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. Nov 23, 2015 understand how the imprest system works in the petty cash book. What is the difference between imprest fund system and fluctuating. The petty cashier of john and james company paid cash for the following expenditures during march 2018. The amount will be below or equal to the limit set by the guidelines to this policy.
Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. An imprest account is one that holds a fixed amount of money and is replenished after a certain period of time. Petty cash book with imprest system simple and tabular forms. 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. The imprest petty cash system is a method of accounting for petty cash expenses. The analytical petty cash book and the imprest system. The most common way of accounting for petty cash expenditures is to use the imprest system. A book in which bank cash transactions are recorded. Petty cash and the imprest cash float system college. 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. The difference between the total of the debit items and that of the total. Petty cash book definition, types, format, examples imprest and. Download petty cash book in excel file in xlsx format. What is difference between main cash book and petty cash book.
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. Dec 12, 2014 the imprest system involves keeping enough petty cash available to meet the needs of the following period of time. Petty cash book is maintained by petty cashier and acts as the petty cash account. 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. A separate column is allotted for each type of expenditure.
How the imprest system of petty cash book works your business. Meaning of petty cash book, its importance and advantages. Difference between receipts and payments account and cash book differences between cash book and cash flow statement. The petty cash book is maintained on a columnar basis, i. The fundamental difference between the main cash book and the petty cash book is that only petty expenses are recorded in the petty cash book. The petty cash book is maintained by separate cashier known as petty cashier. 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. The preferred method of reimbursements is by check, requested via a properly authorized and documented check request. Lecture 5 the analytical petty cash book and the imprest system every business has a number of transactions of very small value which, were they all recorded in the cash book, would only serve to make it more difficult to identify the important transactions that businesses need to keep a close eye upon. Petty cash book is a cash book in which the petty cashier records petty cash. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible.
At the end of the period a petty cash reconciliation is carried out. Jun 14, 2008 an imprest system of petty cash means that the general ledger account petty cash will remain dormant at a set amount. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. The petty cashier will record this amount on the debit side of the petty cash book while the chief cashier will record the same amount on the credit side of the main cash book. In the main cash book all cash payments except payments of petty cash exps.
However, if its petty cash is empty, it just means that someone probably needs to go. What are the differences between petty cash book and the main cash book. These petty cash expenses are recorded in the petty cash book. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. These include receipts from customers and payments to suppliers as well as bank charges, interest received, etc. Analytical petty cash book and the imprest system pressreader.
Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Petty cash book contains daily office expanses like tea, stationary etc. Understand how the imprest system works in the petty cash book. An imprest is a cash account that a business uses to pay for small, routine expenses. If you havent set aside money into petty cash imprest is lending money to. Petty cash book 2019, imprest system of petty cash advantages. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. A petty cash box would be supplied with say 50 pounds. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Apr 26, 2020 the petty cash book is a useful control over petty cash expenditures, since it forces the petty cash clerk to formally record all cash inflows and cash outflows. We have been learning in class and for homework for the past 2 weeks how to draw up a petty cash book imprest.
First, management has to estimate how many small purchases it will make and much money it will need for these purchases. In an imprest petty cash system the petty cash fund is maintained at a fixed sum. What is the difference between an imprest and nonimprest. Petty cash is the small cash reserves that businesses keep on the. The imprest petty cash float system is an important internal control tool to check cash and its usage or theft. Payments in cash of small amounts like traveling expenses, postage, carriage etc. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. A difference between an imprest payroll account and petty cash is petty cash is. Every time when the person who control the bank accountdisbursement to petty cash is able to have a closer internal check on the actual petty cash expenditure incurred. 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. The difference in the total receipts and total disbursements is the balance left with.
This is recorded as a separate account in the companys. Reasons for difference in pass book and cash book balances. 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. A good example of an imprest account is a petty cash system that may be replenished on a daily, weekly or monthly basis. Ten difference between cash book and petty cash book under tabular form 16th january 2020, 09. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. 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. Explain how the imprest system of petty cash book works.
The difference between the total of the debit items and the total column on the. An imprest account limits what can be spent within a fixed time period. 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. Petty cash book explanation, format, example, ordinary and. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. Cash imprest petty cash policy statement based on the cost centers request, the university assigns to one fulltime employee per cost center a petty cash fund commensurate to average departmental minor operating needs and obligations. The sum of money so kept in hand generally termed as petty cash and book in which the. Cash book, pass book, bank reconciliation statement dr. 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. Establish and administer petty cash, imprest and change funds. Petty cash imprest funds and reimbursements petty cash. Now i have been given 2 mock exams for unit 2 to do for homework this week and they are completely different to what we have been learning. The imprest system is a form of financial accounting system.
Petty cash imprest funds are provided to enable departments to make cash conveniently available for minor business expenditures. The firm may adopt imprest system of maintaining petty cash. A petty cash fund is a segregation of an advance of money from a fund to be used for incidental purchases and for explicit purposes explained in paragraph 3. The most common imprest system is the petty cash system. In a business operating this type of cash book, small cash payments are usually made out of petty cash. Under this imprest system of petty cash book, the head cashier provides a.
The cash book and 8 the petty cash book ethaksalawa. Petty cash book maintains records of all petty payments systematically. Simple way of maintaining petty cash records in imprest system. 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. The difference between the amount of cash receipt and the total amount of cash. If during the week thirty pounds was spent and properly logged with vouchers and receipts then at start of next week thirty pounds would be paid.
By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. These small cash payments are recorded in a separate book, known as a petty cash book. An imprest system is used to run and manage a petty cash fund. The petty cash book is not part of the double entry bookkeeping. Differences between main cash book and petty cash book 1 in.
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