Understand how the imprest system works in the petty cash book. A petty cash book is just another kind of cash book that records petty cash transactions, i. It should also be kept in mind that petty cash book is not like the cash book. When the account goes below a certain specified amount, the system is replenished. To remove small cash payments from the main cash book. The advantages of analytical petty cash book are given below.
Less transactions are entered in the main cash book making it less cluttered with only monthly totals transferred to the general ledger. What are the advantages of the petty cash book answers. The importance of petty cash book imprest system is that it helps in basic bookkeeping. Manage your business expenses anytime, anywhere with debitoor invoicing software. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers. Marks the advantages of using the imprest system are. Petty cashier is not allowed to keep idle cash with him if the float is found to be more. As head cashier check the accounts of previous month and gives advance for the coming month, does, errors if any are reduced. The cash book can be maintained properly as petty transactions are maintained separately. A fixed amount of cash is to be paid to a petty cash account, which is stated in a divide account in the general ledger.
Petty cash book maintains records of all petty payments systematically. 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. 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. 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. 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. 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.
The petty cashier has liability not to expend the petty cash more than. What is the importance of petty cash in a business. 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.
A petty cash book records petty payments made in each department by the petty cashiers. Please like, share and subscribe the content for more high quality videos. There are three main advantages of using a petty cash book. A petty cash book gives management a record of all the little. 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. Here are some advantages and disadvantages to using petty cash as an expense management solution. The system is a form of managing petty cash in a business. The advantages of petty cash system enumerated are as follows.
As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. These petty cash expenses are recorded in the petty cash book. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. Petty cash book and advantages of imprest system youtube. A petty cash book is used to record small cash payments made by the business. Petty cash book 2019, imprest system of petty cash. Learn more about petty cash expense management, and decide which system is right for your business.
A separate column is allotted for each type of expenditure. Fixed amount is paid to the petty cashier along with the imprest system. Petty cash book definition, types, format, examples. Also, find out its uses and functions in any contemporary business setup. Advantages of petty cash book saving of time of the main cashier. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. The amount of petty cash also known as the petty cash fund varies by company or organization. Time wastage minimization under this columnar imprest petty cash book petty expenses are not needed to be posted. What are the advantages of maintaining a petty cash book. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. A cash book acts like both a journal and a ledger for cash transactions.
Petty cash book helps in making the records of cash transactions uptodate because of division of labor in recording cash transactions. 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. Causes for difference between cash book balance and pass book balance. The main advantages of imprest system of petty cash are as follows. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs.
How the imprest system of petty cash book works your. Advantages, disadvantages, and the pex alternative. Payments in cash of small amounts like traveling expenses, postage, carriage etc. A petty cashier is responsible to prepare and maintain the petty cash book. Time wastage minimization under this columnar imprest petty cash book petty expenses are not needed to be posted in the relevant ledger account again and again. 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.
Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. The advantages of the imprest system are as follows. The imprest system is a form of financial accounting system. For all detailed video solutions of ts grewal questions of xi and xii accountancy please keep visiting this channel. The main advantages of petty cash book publish your article. What are the advantages of using the imprest system. 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. 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. Thus the method of reimbursing the amount spent by the petty cashier at a fixed time is known as the imprest system of petty cash. 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. Reasons for difference in pass book and cash book balances. By this system a specified amount known as float is left with the petty cashier for petty expenses. The preservation of petty cash book does not need particular knowledge of accounting. Read on for more information on petty cash book advantages, format, systems, and example.
Petty cash book supplies information regarding petty payments made on dissimilar heads more simply and rapidly. Using imprest, the petty cash of a company is kept at a constant rate. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. Is there a better way to solve the small expenditure dilemma. Uses of petty cash book its a cash book used to enter daily petty expenses.
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. 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 chief cashier is relieved from the cumbersome work of petty cash disbursement. Petty cash and the imprest cash float system college.
What are the advantages of a imprest system for petty cash. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. The cash book can be maintained properly as petty transactions are maintained. The imprest system principles of accounts singapore. The imprest petty cash float system is an important internal control tool to check cash and its usage or theft. Petty cash is an easy to understand and familiar method of paying for company expenses. 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.
Petty cash book with imprest system simple and tabular forms e. 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 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. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to the. The most common example of an 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 is an accounting system for paying out and subsequently replenishing petty cash. While reimbursing the petty cash expenses, the main cashier will necessarily examine the petty cash book to make sure that the amount is correctly arrived at. It relieves the cash book and the chief cashier of the burden of recording tiny. Petty cashier is not allowed to keep idle cash with him if the float is found to be more than adequate. The petty cashier is the only one who is authorised for payment of cash vouchers. Saving of efforts in recording small expenses in the cash book and then entering the same in the ledger. Imprest system is the most popular way of keeping the petty cash book. The firm may adopt imprest system of maintaining petty cash.
An imprest system of petty cash is used for more control over cash in hand. Advantages and disadvantages of analytical petty cash book. Cash book could be a checking or other type of money access account. Petty cash book format example definition explanation. Meaning of petty cash book and advantages of keeping petty. This unique feature of the imprest petty cash system is one of its most important advantages as it allows spot checks to be made on the petty cash fund at any point in time, as demonstrated in the table below. The petty cash book is maintained by separate cashier known as petty cashier.
Advantages to using petty cash petty cash is an easy to understand and familiar method of paying for company expenses. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. Petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc. Need and importance of bank reconciliation statement 14. The imprest system is an accounting system designed to track and document how cash is being spent. Let us learn about the petty cash book and the various systems of maintaining the said account.
Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash. At the end of a period totals of all heads of petty expenses are transferred to a relevant ledger account. Here we discuss the format of petty cash book, types of petty cash systems. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well.
Petty cash book definition the petty cash book is defined as relatively small amount of cash kept at hand for making quick payments for miscellaneous small expenses in the business concern. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. Petty cash book maintains records of all petty payments analytically. The most common imprest system is the petty cash system. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Person who maintains petty cash book is known as petty cashier and these small expenses are termed as petty expenses.
The advantages of treble column cash book are stated below, time and laborsaving a good deal of time and labor are saved because for maintaining a treble column cash book cash account, bank account and discount accounts are not needed to. Read this article to learn about the meaning and preparation of analytical and imprest system of petty cash book. What are the advantages of a imprest system for petty cash answers. The daily transactions that use the petty cash are. It is an accessible, convenient way to pay for small purchases. Advantages of the imprest system of keeping petty cash the petty cash book is used to record small payments. The record of petty cash is checked by the cashier periodically, so that a mistake, if committed. 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. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Such payments include postage, reimbursement to employees for small purchases of office supplies and numerous similar items. The advantages of using a petty cash book are as follows. Meaning of petty cash book, its importance and advantages. Petty cash book helps in making the main cash book more informative, clean and clear by including only major transactions. The money in the hands of petty cashier is limited to the imprest amount, thus the risk of misuse of cash or fraud is minimized.
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