Imprest system of petty cash book meaning

Petty cash book format example definition explanation. Under this system, an estimate is made of the amount required for petty expenses for a period say a week, a fortnight, or a month. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. 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. Petty cash book definition, types, format, examples. Petty cash book with imprest system simple and tabular forms. The importance of petty cash book imprest system is that it helps in basic bookkeeping.

This type of book is maintained just like a cash book. An imprest system is used to run and manage a petty cash fund. The book has one column to record receipt of cash which is only from the main cashier and other columns to. The petty cash imprest system allows only the replenishment of the spend made. Characteristics of the imprest petty cash system are course. An imprest system of petty cash is used for more control over cash in hand.

However, since cash is the most liquid resource of the entity, strong controls over it are necessary to avoid possible misappropriation. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. Feb 15, 2019 this video is a part of the series for cbse class 11, accounts demo videos for chapter cash book. Petty cash imprest system is an effective way to manage small day to day expenses. This type of cash book usually uses the imprest system.

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. Petty cash book is maintained by petty cashier and acts as the petty cash account. From the following particulars prepare a petty cash book under imprest system. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Imprest account is maintained for the entry of the petty expensese which ultimately known as clewar explanation of petty expenses and these expenses will be entered in the analytical petty cash book under imprest system. 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. The system is very useful specially if an analytical petty cash book is used. A constant or unchanging amount that is often used when referring to petty cash. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible.

Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. Apr 29, 2020 such a system is known as the imprest system of petty cash. 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. The various columns are totalled to show the reason for making payments, and then the. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established.

Accounting for petty cash explanation, related controls and. A petty cash voucher is used to record money claimed and subsequently paid out. Petty cash book is maintained by the petty cashier. Petty cash book with imprest system simple and tabular. The main advantages of imprest system of petty cash are as follows. Petty cash book is the book which is used for the purpose of recording expenses involving small amounts. Petty cash book 2019, imprest system of petty cash. Understand how the imprest system works in the petty cash book. It is an accessible, convenient way to pay for small purchases. Beside petty expenses, receipts from main cash are recorded.

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. This video is a part of the series for cbse class 11, accounts demo videos for chapter cash book. When the account goes below a certain specified amount, the system is replenished. An imprest system is a method to account for petty cash by. When the whole amount of petty cash is spent, the petty cashier submits the account to chief cashier who again pays a lumpsum amount to petty cashier. At the end of the period, the cashier submits the report and the amount spent by him is reimbursed so that. 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. 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.

Under this system, the total petty expenses for a particular period are estimated and that amount is advanced by the head cashier to the petty cashier. Petty cashier is given the appropriate amount of cash and after spending the whole of that amount, he submits the account to the head cashier. Petty cash book may be maintained by the ordinary system or by imprest. Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the. Commission of fraud is reduced as the chief cashier verifies petty cash book along. 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. This can be handled by a junior member of the staff, making it simpler for management. This makes the entire petty cash system susceptible to abuse or fraud. 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.

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. 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. At least once a month the float is balanced and reimbursed. While convenient for small purchases, it is not a realistic solution for larger expenses. Characteristics of the imprest petty cash system are. Meaning of petty cash book a petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically. At the end of the period a petty cash reconciliation is carried out. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below. The book has one column to record receipt of cash which is only from the main cashier and other columns to record payments of various types. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. Petty cash book explanation, format, example, ordinary. The imprest petty cash system is a method of accounting for petty cash expenses. First, management has to estimate how many small purchases it will make and much money it will need for these purchases. The system is a form of managing petty cash in a business.

This is the maximum amount of cash that can be held at any time. Imprest meaning in the cambridge english dictionary. Petty cash imprest funds and reimbursements petty cash. The imprest system is an accounting system for paying out and subsequently replenishing petty cash. Petty cash book can be maintained either in a simple or in analytical way. 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. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. 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 a non imprest system where a fixed amount is issued every month, e. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and. How the imprest system of petty cash book works your. There might be a petty cash drawer or box in each department for. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i.

Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds. Meaning of petty cash book, its importance and advantages. As the disbursements are for petty item hence the name petty cash. Petty cash or the petty cash fund is a small amount of cash on hand used for paying expenses too small to merit writing a check. Such a system is known as the imprest system of pettycash. What are the importance of petty cash imprest system answers. A petty cash is a cash book used to enter all small or petty expenses obtained.

Petty cash book explanation, format, example, ordinary and. Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque the most common way of accounting for petty cash expenditures is to use the imprest system. Imprest system meaning in the cambridge english dictionary. What is the petty cash imprest system, and why would a. 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 2019, imprest system of petty cash advantages. Documentation requiredkeep all dockets andor receipts for petty cash expenses as proof of payment made out of imprest. So, if you start the month with 100 in your petty cash float and spend 90 of that cash in the month, an amount of 90 will be then placed in your petty cash float to. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. What are the advantages of a imprest system for petty cash. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. Imprest definition of imprest by the free dictionary.

Sep 30, 2019 petty cash is an easy to understand and familiar method of paying for company expenses. In this series, we have completed all the concepts, examples and the entire ncert exercises. Overall, petty cash is a largely outdated and inefficient system. Apr 19, 2017 in a non imprest system where a fixed amount is issued every month, e. 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. The amount of reimbursement is equal to the expenses paid through petty cash. Under the imprest petty cash system, the petty cashier amount is fixed for a given time period under.

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. Sep 19, 2019 petty cash or the petty cash fund is a small amount of cash on hand used for paying expenses too small to merit writing a check. 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 daily transactions that use the petty cash are entered into this system which ensures that there is. An imprest is a cash account that a business uses to pay for small, routine expenses. Each time cash level runs low, the petty cash imprest is injected with cash by drawing a cheque.

Imprest system petty cash book archives tutorstips. Petty cash and the imprest cash float system college. During an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. Petty cash is the small cash reserves that businesses keep on the. The preferred method of reimbursements is by check, requested via a properly authorized and documented check request. The imprest system is a form of financial accounting system. Most companies set up a special fund called a petty cash fund for small purchases and office expenditures.

Nov 27, 2019 the imprest petty cash system is a method of accounting for petty cash expenses. It may be maintained by ordinary or by the imprest system. By watching this video you will understand how to record all the entries in. An advance or a loan of funds, especially for services rendered to a government. Such payments are generally handled by a petty cash imprest system whereby an amount of float is fixed. The imprest system is used for petty cash book maintenance. How the imprest system of petty cash book works your business.

When a business doesnt provide access to company credit cards, or employees would rather not wait to be reimbursed for purchases, using petty cash is a simple alternative. Petty cash imprest funds are provided to enable departments to make cash conveniently available for minor business expenditures. What are the advantages of using the imprest system. The amount so ascertained is given to the petty cashier in. The cash allocated for petty expenditures for a specific period is entered on the credit side of general cash book and on the debit side of petty cash book. Jul 16, 2019 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. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. The float is fixed but will always be made up of petty cash in hand or vouchers paid. Using imprest, the petty cash of a company is kept at a constant rate. This is recorded as a separate account in the companys. Under this system, the petty cashier is given a lumpsum amount for meeting petty expenses. Under this time period, the cashier has to run the petty cash account under the given budget. The most common imprest system is the petty cash system.

269 742 887 570 730 1291 505 981 755 1332 1038 1150 83 245 1420 626 570 1290 999 801 439 806 100 678 120 1538 1380 1476 1392 533 1349 105 1062 1251 676 1127 203 772 542 320 905 799 1261