Advantages of imprest system of petty cash book

Nov 23, 2015 understand how the imprest system works in the petty cash book. While convenient for small purchases, it is not a realistic solution for larger expenses. Petty cash book may be maintained by the ordinary system or by imprest. The imprest system is a form of financial accounting system. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. It should also be kept in mind that petty cash book is not like the cash book. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Advantages of imprest systemthe 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. 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. What are the advantages of a imprest system for petty cash answers. The petty cashier is given a certain sum of money at the beginning of the fixed period e. At the end of the period, petty cashier submits the. Columnar petty cash book and its preparation process. The imprest petty cash float system is an important internal control tool to check cash and its usage or theft.

It is a system of petty cash book where a person is given a fixed amount in the beginning of the period, the petty cashier submits the account of expenses keeping surplus amount himself. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. 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 particular time, generally a month. Any cash, which the petty cashier receives, will be recorded on the debit side left cash column of the book and any cash which he pays out will be recorded on the credit side right cash column of the boo k. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund. 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. Petty cash is a comprehensible and common method of paying for business operating cost. Petty cash book definition, types, format, examples. Overall, petty cash is a largely outdated and inefficient system. This is recorded as a separate account in the companys. A cash book acts like both a journal and a ledger for cash transactions. 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. Please like, share and subscribe the content for more high quality videos.

Chapter 11 petty cash book and imprest system accounting. Need and importance of bank reconciliation statement. The system is a form of managing petty cash in a business. Advantages and disadvantages of analytical petty cash book. It should also be kept in mind that petty cash book is a branch of cash book.

The main advantages of petty cash book publish your article. 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 analytical petty cash book and the imprest system. The chief cashier is relieved from the cumbersome work of petty cash disbursement. How the imprest system of petty cash book works your. The most common imprest system is the petty cash system. Under the imprest system, the chief cashier replenishes the cash such that the petty cash box always has the same amount of float at the start of each period. Person who maintains petty cash book is known as petty cashier and these small expenses are termed as petty expenses. Petty cash book maintains records of all petty payments systematically. The amount of float is so fixed that it may be adequate to meet petty expenses of the prescribed period. The firm may adopt imprest system of maintaining petty cash.

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. This method is a structure of financial accounting system. What are the advantages of maintaining a petty cash book. What are the advantages of using the imprest system. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. When petty cash is easy to get to employees, it is a suitable way to pay for little purchases.

Beside petty expenses, receipts from main cash are recorded. Petty cash book and advantages of imprest system youtube. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. It may be maintained by ordinary or by the imprest system. Petty cash book explanation, format, example, ordinary. The cash book can be maintained properly as petty transactions are maintained separately. 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. The petty cashier spends the imprest cash during the period. Petty cash and the imprest cash float system college. Feb 08, 2019 for all detailed video solutions of ts grewal questions of xi and xii accountancy please keep visiting this channel.

Commission of fraud is reduced as the chief cashier verifies petty cash book along. 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. Petty cash is the small cash reserves that businesses keep on the. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. These small cash payments are recorded in a separate book, known as a petty cash book. Nov 27, 2019 the imprest petty cash system is a method of accounting for petty cash expenses. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. The daily transactions that use the petty cash are. 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. Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system along with its advantages and disadvantages. 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. An imprest system of petty cash is used for more control over cash in hand. Petty cash book explanation, format, example, ordinary and imprest.

In a business operating this type of cash book, small cash payments are usually made out of petty cash. 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. 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. Many expenses of small nature are recorded in petty cash book. You may learn more about accounting basics from the following articles mark to market accounting explain. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. The petty cashier has liability not to expend the petty cash more than. During an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. So, the book, wherein day to day petty expenses for a particular period of a business concern, are recorded in chronological order of dates is called petty cash book. 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. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. What are the advantages of a imprest system for petty cash. The imprest system of petty cash is used by most of the companies because of the following advantages.

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 details above on petty cash book format, advantages, and samples should enable you to accurately account for pettysmall purchases with the knowledge that they go a long way in forming the overall expenses of the organization. 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. Allows chief cashier to controllimitkeep track of petty cash. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Apr 29, 2020 petty cash book 2020, imprest system of petty cash advantages by caknowledge team last updated apr 29, 2020 0 petty cash book. 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. Each disbursement paid out from the float must be supported by a petty cash voucher and issued by an authorized person. The importance of petty cash book imprest system is that it helps in basic bookkeeping. The most general imprest system is the petty cash system.

Petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc. Advantages, disadvantages, and the pex alternative. Petty cash book is maintained by petty cashier and acts as the petty cash account. 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. Learn more about petty cash expense management, and decide which system is right for your business. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. The petty cashier has to account for his expenses, before he can draw. Cash book could be a checking or other type of money access account. Petty cash book 2019, imprest system of petty cash advantages.

The advantages of analytical petty cash book are given below. Payments in cash of small amounts like traveling expenses, postage, carriage etc. Marks the advantages of using the imprest system are. 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. Petty cash book explanation, format, example, ordinary and. Petty cash book with imprest system simple and tabular. Fixed amount is paid to the petty cashier along with the imprest system.

In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. What are the advantages of the petty cash book answers. The imprest petty cash system is a method of accounting for petty cash expenses. Let us learn about the petty cash book and the various systems of maintaining the said account. Causes for difference between cash book balance and pass book balance. This book complements the main cash book, therefore, promoting financial accountability and transparency. Advantages of the imprest system of keeping petty cash. Sep 26, 2019 it is the most scientific method to maintain petty cash. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively.

It is the most scientific method to maintain petty cash. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash. 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 various columns are totalled to show the reason for making payments, and then the. Using imprest, the petty cash of a company is kept at a constant rate.

For all detailed video solutions of ts grewal questions of xi and xii accountancy please keep visiting this channel. Meaning of petty cash book, its importance and advantages. This makes the entire petty cash system susceptible to abuse. How the imprest system of petty cash book works your business. Petty cash book 2019, imprest system of petty cash.

Under this system, total petty expenses for a particular period are estimated and the amount is advanced to the petty cashier. The imprest system master principles of accounts poa. A petty cash book is just another kind of cash book that records petty cash transactions, i. What is the importance of petty cash in a business.

This type of book is maintained just like a cash book. A petty cash book gives management a record of all the little. Petty cash book 2020, imprest system of petty cash advantages by caknowledge team last updated apr 29, 2020 0 petty cash book. Advantages of imprest system of petty cash youtube. Petty cash book is the book which is used for the purpose of recording expenses involving small amounts. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly.

Imprest system of petty cash fund the world impress means advance amount which is personal to certain person to make petty expenses. Recording of transactions in a petty cash book is easy. Petty cash book format example definition explanation. In module 12, which covered the bank cash book, the advantages of paying all cash and cheques into the bank intact were evident. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. The main advantages of imprest system of petty cash are as follows. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. The advantages of petty cash system enumerated are as follows. An imprest system is used to run and manage a petty cash fund.