Imprest system of keeping the petty cash book

The various columns are totalled to show the reason for making payments, and then the. 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. How the imprest system of petty cash book works your. Petty cash book is a kind of cash book which records large number of small payments such as conveyance, cartage, postage, telegrams and other expenses under the imprest system. 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. It is an imprest system which means that it starts with a fixed amount, the amount is reduced because of spending, and then the amount is replenished to start it back at. The petty cashier is responsible for updating and maintaining the petty cash book. Petty cash book l imprest system l class 11th accounting l. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the.

In order to smoothly run day to day operations of a business, it is sometimes required to assign limited amount of funds petty cash to a designated employees who would utilize those funds to carry out small scale expenses on behalf of company under the authority. Advantages of the imprest system of keeping petty cash. This type of cash book usually uses the imprest system. Understand how the imprest system works in the petty cash book. The daily transactions that use the petty cash are entered into this system which ensures that there is. The more scientific method of maintaining petty cash so for introduced into practice is the imprest system. In some cases, a description field is provided to help the petty cashier feed insufficient information about every purchase. Accounting for petty cash explanation, related controls. 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. Such payments are generally handled by a petty cash imprest system whereby an amount of float is fixed. The keeping of the book is not different from the keeping of the main cash book. What are the advantages of a imprest system for petty cash. Petty cash replenishment refers to the process of restoring the cash balance in the petty cash fund back to its original imprest amount.

By keeping track of all petty cash transactions no matter how petty you have records to back up deductions for those small business expenses. How the imprest system of petty cash book works azcentral. Under imprest system, a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists of a week or month. Is the cash book which used to record small expensesexpenditure which take place from time to time within the business. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. The bookkeeper records the amount allocated to the petty cash fund in the petty cash book, which subsequently reflects all changes to the petty cash fund. This makes the entire petty cash system susceptible to abuse or fraud. This separation of cash books has many advantages of the firm like. Under this time period, the cashier has to run the petty cash account under the given budget. Preparation of petty cash book in very easy method. Develop the skill of maintaining petty cash book on imprest system. This form of recording petty cash is called the the imprest petty cash system. Petty cash should be properly controlled with a petty cash log and accurately entered into the bookkeeping system in exactly the same way you would maintain a bank account.

By this system a specified amount known as float is left with the petty cashier for petty expenses. Maintaining a cash book under the stated system is called an imprest petty cash book. 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. 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. This type of book is maintained just like a cash book. Below is a breakdown of all columns and information contained in a petty cash book. Under the imprest system maintaining petty cash book, petty cashier is provided with a fixed amount of money known as imprest or float which is sufficient to meet the needs of balancing period.

Using imprest, the petty cash of a company is kept at a constant rate. This is recorded as a separate account in the companys. Payments in cash of small amounts like traveling expenses, postage, carriage etc. A petty cash book takes in relevant details concerning purchases. The most common imprest system is the petty cash system. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. The imprest system master principles of accounts poa. Each disbursement paid out from the float must be supported by a petty cash voucher and issued by an authorized person. Meaning of petty cash book format of petty cash book advantages of petty cash book full. This is the maximum amount of cash that can be held at any time. 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 a formal summarization of petty cash expenditures, sorted by date. The firm may adopt imprest system of maintaining petty cash.

Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Petty cash book 2019, imprest system of petty cash. There are two primary types of entries in the petty cash book, which are a debit to record cash received. The petty cashier is given a sum of money in the beginning of the period. Petty cash book explanation, format, example, ordinary.

Petty cash implies a small amount of cash in hand, with the petty cashier, who uses the amount to pay for petty cash. This can be handled by a junior member of the staff, making it. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. These are expenses which are incurred day after day. 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 amount paid out by the chief cashier is credited in his cash book to complete the double entry. Payment side of the cash has many columns, first colum is used for cash while other columns.

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. A standard petty cash book has one column for all receipts. 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. While convenient for small purchases, it is not a realistic solution for larger expenses. At the end of the period, the cashier submits the report and the amount spent by him is reimbursed so that. Companies keep a small amount of cash on the premises in a. The imprest system is used for petty cash book maintenance. Meaning of petty cash book and advantages of keeping petty. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. The system is a form of managing petty cash in a business. At the end of an accounting period a count of the petty cash shows that the fund contains cash of 240 and expense vouchers for supplies of 40.

The imprest petty cash float system is an important internal control tool to check cash and its usage or theft. 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. Petty cash book is a very simple and usefull book normally maintained where imprest cash system is in place. Imprest system meaning in the cambridge english dictionary. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. Petty cash management is referred to as the system of keeping records in order to track issuance and use of petty cash funds. The imprest system is a form of financial accounting system.

An imprest system of petty cash is used for more control over cash in hand. 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. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to the. What are the importance of petty cash imprest system answers. Businesses generally keep small amounts of cash to meet small miscellaneous payments such as entertainment expenses and stationery costs.

To record such expenses, a different book known as a petty cash book is maintained. 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. How to set up and maintain a petty cash account basic. In accounting, an imprest system typically involves the management and monitoring of petty cash. This makes recording keeping a little simpler, as there will be no additional entries to the general ledger account for petty cash. 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 most important part of a petty cash system is the documentation of each transaction. At end the firm reimburses him the amount paid by him so that the balance of cash with him.

The petty cash book is maintained by separate cashier known as petty cashier. What are the advantages of using the imprest system. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds. At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. Suppose for example a business maintains a petty cash fund of 300. Imprest system is the most popular way of keeping the petty cash book. Documenting transactions is the way a business documents business expenses for tax purposes. Petty cash is the small cash reserves that businesses keep on the premises for miscellaneous cash needs. During the period he makes payment out of this money. 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 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. 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 postage, telegrams, stationary and office sundries etc.

The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. The sum of money so kept in hand generally termed as. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. At the end of the period, let say, a month, an amount equal to the amount he has spent is given back to the cashier to restore his cash at hand to the original amount held. Or is the book which used to record the small expenditure which incurred by the businessorganization for a certain period of time such as day to day, week to week or month petty cashier. In most cases, the petty cash book is an actual ledger book, rather than a computer record. 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. Just as in the main cash book, all payments are credited in the petty. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. Each transaction recorded in the books of accounts goes through these three main accounts in order to get captured. The imprest system is an accounting system for paying out and subsequently replenishing petty cash.

It may be maintained by ordinary or by the imprest system. 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 and the imprest cash float system college. Thus, the book is part of a manual record keeping system. Overall, petty cash is a largely outdated and inefficient system. Class 11th accounting imprest system of petty cash book. An imprest system is used to run and manage a petty cash fund. What is imprest system in maintain petty cash book. Is a person who received money in order to meet petty expenditures. What are the advantages of maintaining a petty cash book. These petty cash expenses are recorded in the petty cash book. With an imprest system, accountants or bookkeepers track petty cash in the petty cash book.