What is the petty cash imprest system, and why would a. Under this system a fixed sum of money is given to the petty cashier to cover the petty expenses for the month. It should also be kept in mind that petty cash book is a branch of cash book. The petty cashier makes the small payments and records them in the petty cash book. The imprest system is a form of financial accounting system. The most common example of an imprest system is the petty cash system. 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. In most cases, the petty cash book is an actual ledger book, rather than a computer record.
The analytical petty cash book and the imprest system chapter 18 petty cash not important a book of original entry, where small, usually insignificant amounts of. The additional analysis columns are used to analyze expenditures as they arise. The petty cash book is ruled in the form of the single column cash book with an amount column and addition oat columns for the more usual classes of expenditure. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. The person who is maintaining petty cash book is called as a petty cashier. A petty cash fund is a type of imprest account, which means that it contains a. Generally a columnar petty cash book is used in which different columns are provided for different petty expenses. The petty cash imprest system allows only the replenishment of the spend made. The amount of petty cash also known as the petty cash fund varies by company or organization. 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. Understand how the imprest system works in the petty cash book.
It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Imprest account imprest system example the strategic cfo. Petty cash book is maintained by the petty cashier and act as the petty cash book petty cash book 3. Define the purpose and use of a petty cash fund, and. The most common imprest system is the petty cash system. 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 of the accounting,this amount is called thefloatthis amount should be sufficient to cover the estimated petty cash book expenditure for stated period. Youll need to nominate a petty cash manager, typically an accountant, bookkeeper or other supervisor to oversee operations and collect receipts, if necessary. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. Petty cash book is an accounting book used for recording expenses which are small and of little value, for example, stamps, postage and handling, stationery, carriage, daily wages, etc these are expenses which are incurred day after day. The main advantages of petty cash book publish your article. 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 petty cashier spends the imprest cash during the period.
A petty cash book takes in relevant details concerning purchases. When the account goes below a certain specified amount, the system is replenished. In other words, the amount lying with the petty cashier will never exceed imprest cash. This makes recording keeping a little simpler, as there will be no additional entries to the general ledger account for petty cash. Generally, petty cash book is maintained on imprest system.
An imprest system is where one can only reimburse the amount used e. An imprest system of petty cash is used for more control over cash in hand. Most companies set up a special fund called a petty cash fund for small purchases and office expenditures. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. 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. The cashier makes payment out of the amount granted to him. Nonimprest system of petty cash book meaning of imprest or float imprest or. A petty cash system in some businesses may be replaced by use of a prepaid. For smallscale business, simple petty cash book is sufficient but on a medium or large scale business number of petty expenses increases hence it is desirable to have the separate record for each type of petty expenses. The firm may adopt imprest system of maintaining petty cash. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. What is the petty cash imprest system, and why would a business use it. 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.
Subscribe to our youtube channel so as not to miss a tutorial video. Thus, the book in which small payments, which are not convenient to record in the main cash book, like postage, traveling expenses, purchase of stationery etc. A petty cash fund is a type of imprest account, which means that it contains a fixed amount of cash that is replaced as it is spent in order to. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the.
The imprest system is an accounting system designed to track and document how cash is being spent. How the imprest system of petty cash book works your. Payment side of the cash has many columns, first colum is used for cash while other columns are used for maintaining head of accunt wise entries. As far as imprest accounting goes, petty cash in an imprest account is. The main advantages of imprest system of petty cash are as follows. This form of recording petty cash is called the the imprest petty cash system. Totals are carried forward from page to page until the end of the periods. Most businesses use petty cash for this, monitoring payments in a petty cash book. Petty cash book 2019, imprest system of petty cash. Petty cash transactions the imprest system although businesses adopt a system of banking all receipts and payments by cheque, there are some expenses like postage, fares, stationery, tea and coffee which are so small in amount that is impractical to pay by cheque. The most general imprest system is the petty cash system. With an imprest system, accountants or bookkeepers track petty cash in the petty cash book. 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 and to record them in a separate cash book. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance.
The analytical petty cash book and the imprest system. 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. A standard petty cash book has one column for all receipts. Petty cash is the small cash reserves that businesses keep on the. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. The second system of petty cash is the imprest system. Petty cash book format example definition explanation.
The first definition of imprest in the dictionary is a fund of cash from which a. While convenient for small purchases, it is not a realistic solution for larger expenses. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. This makes the entire petty cash system susceptible to abuse or fraud. The petty cash book is maintained by separate cashier known as petty cashier. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. 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. The details of the petty cash vouchers are entered into a petty cash book. An imprest system is a method to account for petty cash by maintaining a balance in a fund that equals petty cash receipts plus additional cash in the fund. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. There are two primary types of entries in the petty cash b. Imprest definition and synonyms of imprest in the english. In order to define imprest, it is important to understand what to use an.
The importance of petty cash book imprest system is that it helps in basic bookkeeping. 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 some cases, a description field is provided to help the petty cashier feed insufficient information about every purchase. Petty cash book definition, types, format, examples.
Under the imprest system the petty cashier maintains a fixed float balance. This method is a structure of financial accounting system. How to set up and maintain a petty cash account basic. This period could be a week, a month or even sometimes a day. What are the advantages of a imprest system for petty cash. So, if you start the month with 100 in your petty cash float and spend 90 of that cash in the month, an. Under this system the petty cashier at first receives from the chief cashier a fixed sum of. 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. 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.
Under this system, total petty expenses for a particular period are estimated and the amount is advanced to the petty cashier. Each employee wishing to make a purchase should go through this representative, rather than leaving the. It is the most scientific method to maintain petty cash. Commission of fraud is reduced as the chief cashier verifies petty cash book along. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs.
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. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. The bookkeeper records the amount allocated to the petty cash fund in the petty cash book, which. Under this system, the petty cashier is given a fixed sum of money in the beginning of the month or week. The daily transactions that use the petty cash are entered into this system which ensures that there is.
Read this article to learn about the meaning and preparation of analytical and imprest system of petty cash book. 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. Thus, the book is part of a manual recordkeeping system. It is the book which is used for the purpose of recording expenses involving small amounts. Besides maintaining a main or general cash book, many companies also maintain a small cash book known as petty cash book to record small day to day expenditures of the business 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. Cash includes currency and coins, although most businesses do not keep much of this type of cash around. A free powerpoint ppt presentation displayed as a flash slide show on id. An imprest system is a method to account for petty cash by. Payments in cash of small amounts like traveling expenses, postage, carriage etc. When the petty cashier needs further cash, he makes up the petty cash book and presents it to the chief cashier, who verifies the accounts and gives further amount. 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. Many expenses of small nature are recorded in 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 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.
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. Petty cash book system are also called as imprest system. Overall, petty cash is a largely outdated and inefficient system. In this system, the petty cashier is entrusted with a specified amount at the beginning of every month, fortnight or week. Cash book could be a checking or other type of money access account. Manage your business expenses anytime, anywhere with debitoor invoicing software. Below is a breakdown of all columns and information contained in a petty cash book. Also included as a part of cash are the balances kept at banking and financial institutions. Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system. Petty cash book is a very simple and usefull book normally maintained where imprest cash system is in place. These petty cash expenses are recorded in the petty cash book. Define the purpose and use of a petty cash fund, and prepare.
The more scientific method of maintaining petty cash so for introduced into practice is the imprest system. A separate column is allotted for each type of expenditure. In this way the petty cashier will start every time with an amount equal to imprest cash. Here the petty cashier is given a lump sum amount of money at the beginning of the accounting period. Petty cash book is a type of cash book, which use to record small amount of receipts and payment.
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