The petty cash book is not part of the double entry bookkeeping. Required a state one advantage of the imprest system of petty cash. At end the firm reimburses him the amount paid by him so that the balance of cash with him. An imprest is a cash account that a business uses to pay for small, routine expenses. The head cashier before funding again examines the. The imprest petty cash system is a method of accounting for petty cash expenses. H ence, when the petty cash is topped up, the amount of the top up should always be the total of the voucher payments since the last float the petty cash book looks much the same as the main cash book.
Petty cash book format example definition explanation. An imprest petty cash fund would least likely be used to pay for which of the following items. Controllimitkeep track of petty cash expenditure the cash remaining and the vouchers received should equal the imprest can help to reduce fraud or other suitable advantage. The difference in the total receipts and total disbursements is the balance left with. During the period he makes payment out of this money. Under imprest, petty cash book system petty cashier submits a statement of expenditure to the head cashier at an interval of a certain period and thereafter receives funds from him for further expenses. State the reasons for the difference between the cashbook balance and passbook balance. 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 checked by the chief cashier at the end of a particular period. A good example of an imprest account is a petty cash system that may be replenished on a daily, weekly or monthly basis. Due to grow of electronic transactions, the imprest system is becoming less common.
Imprest, petty cash and other revolving funds are not budgeted because they represent working capital for expenditures that are properly budgeted in other funds. Petty cash book makes possible for making a comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. By watching this video you will understand how to record all the entries in. Let us learn about the petty cash book and the various systems of maintaining the said account.
This occurs with an imprest petty cash system and an imprest payroll account. The person who is responsible for the recording the receipts and the payments is known as the petty cashier. The voucher would show the date, amount, recipient, purpose and general ledger account. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. A separate column is allotted for each type of expenditure. In the main cash book all cash payments except payments of petty cash exps. 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. Cash book is the main book while petty cash book is in support of the cash book in order to reduce the burden of larger and heavy amounts of cash paid or received. Target audience entrepreneurs, corporate departmental managers business planners company secretaries, financial controllers and accountants executives and supervisors all other personnel who are interested in business continuity planning and management. What is the difference between an imprest and nonimprest. The system is a form of managing petty cash in a business. The most common imprest system is the petty cash 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. Petty cash book is a cash book in which the petty cashier records petty cash. Petty cash book explanation, format, example, ordinary. It gives a quick overview of how much cash has been achieved and how much have been paid in column format. Nov 27, 2019 the imprest petty cash fund is established. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. Understand how the imprest system works in the petty cash book.
Petty cash book definition, types, format, examples imprest and. A petty cash fund is established, with a set amount of. The petty cashier will record this amount on the debit side of the petty cash book while the chief cashier will record the same amount on the credit side of the main cash book. Now i have been given 2 mock exams for unit 2 to do for homework this week and they are completely different to what we have been learning. Fraud, internal control, and cash flashcards quizlet. Petty cash book explanation, format, example, ordinary and imprest. Cash book takes into account the cash payments and cash receipts. An imprest account limits what can be spent within a fixed time period. This can be handled by a junior member of the staff, making it. There might be a petty cash drawer or box in each department for. A column for sundries is usually added for miscellaneous. A petty cash book is just another kind of cash book that records petty cash transactions, i.
Differences between main cash book and petty cash book 1. Petty cash, imprest system, cash controls,internal. The general ledger account for petty cash remains fixed at the amount allocated to the petty cash book. Which of the following would not explain a difference between the companys cash balance and the banks balance for the. The auditors test the clients monthly bank reconciliation to verify whether the clients recorded bank balance is the same amount as the actual cash in the bank. Related topic difference between cost and management accounting analytical petty cash book.
An imprest account is one that holds a fixed amount of money and is replenished after a certain period of time. The various columns are totalled to show the reason for making payments, and then the. For purpose of financial reporting the amount of money in petty cash is treated as part of cash balance. Petty cash costs receipts are used as the basis for periodic replenishments of the petty cash fund. Dec 04, 2018 the petty cash book is a formal summarization of petty cash expenditures, sorted by date. Periodically reconcile any difference between balance per cash book and balance per bank statement refer article on bank reconciliation 5 petty cash imprest system refer to the article on petty cash and petty imprest cash float. What are the difference of petty cash voucher and petty. Under this imprest system of petty cash book, the head cashier provides a. It is usually embedded in money management or finance related softwares. 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. The fundamental difference between the main cash book and the petty cash book is that only petty expenses are recorded in the petty cash book. 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 difference between the amount of cash receipt and the total amount of cash. The petty cashier is given a sum of money in the beginning of the period.
What is similarity between cashbook and petty cashbook. Petty cash book contains daily office expanses like tea, stationary etc. These petty cash expenses are recorded in the petty cash book. Also, it will enable the accountant or the management to analyze the expenses under the. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Guidance in this section applies to petty cash, imprest accounts, working funds, advance travel, stamp funds, change funds, or any other revolving funds set aside for facilitating minor. A petty cash book is a book of vouchers which are prepared each time a disbursement is made from petty cash. The cash would normally be drawn from the cash checking account, and the journal to post the imprest petty cash would be as follows. Petty cash book explanation, format, example, ordinary and.
Cash book is the main book while petty cash book is in support of the cash book in order to reduce the burden of larger and heavy amounts of cash. In the company, the petty cash book is usually maintained by the administrative department of the company as the accounts departments are usually occupied by the larger business transactions and also the admin department is only responsible for such kind of expenses. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. The main difference between the two is that rather than transfer funds from a general bank account to another special account at the bank, the company removes cash from its general bank account to. These include receipts from customers and payments to suppliers as well as bank charges, interest received, etc. Petty cash is a small reserve of used for transactions and expenditures where it doesnt make sense to write cheques. Considered as the most beneficial method of recording petty cash payments. The petty cash book is maintained by separate cashier known as petty cashier. A fixed balance is maintained in the account, and it is replenished routinely to maintain that. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Advantages and disadvantages of analytical petty cash book. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Bars cash manual office of the washington state auditor.
The people in charge of the fund replenish the account with the same amount that was spent. We have been learning in class and for homework for the past 2 weeks how to draw up a petty cash book imprest. If you havent set aside money into petty cash imprest is lending money to. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. Which of the following would not explain a difference between the companys cash balance and the banks balance for the client. In most cases, the petty cash book is an actual ledger book, rather than a computer record. Petty cash book definition, types, format, examples. Each time money is withdrawn, a voucher must be placed in the cash box to account for any missing funds.
Nov 23, 2015 understand how the imprest system works in the petty cash book. Imprest system petty cash book archives tutorstips. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. 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. A cash book is a type of subsidiary book where cash or bank receipts and cash or bank payments made during a period are recorded in a chronological order. Using imprest, the petty cash of a company is kept at a constant rate. A difference between an imprest payroll account and petty cash is petty cash is. Practical accounting skills in handling full set of. The imprest system is a form of financial accounting system. Suppose a business wants to implement an imprest petty cash system and establish a fixed petty cash fund of 100 at the start of an accounting period. Difference between petty cash and main cash book answers. What is the difference between cash and petty cash.
The imprest system is used for petty cash book maintenance. In an imprest petty cash system the petty cash fund is maintained at a fixed sum. Need and importance of bank reconciliation statement. One major advantage of this analytical system is that it saves time. The petty cashier of john and james company paid cash for the following expenditures during march 2018.
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. It simply includes debit column, credit column, reference number and date of that particular transaction. Payments in cash of small amounts like traveling expenses, postage, carriage etc. At the end of each month when the petty cashier approaches the main cashier for reimbursement, the latter cashier prepares a cheque voucher in which he lists the total of various payment analysis columns of the petty cash book. Imprest system of petty cash book the amount which the main cashier hands over to the petty cashier in order to meet the petty cash expenses of a given period is known as. Petty cash book 2019, imprest system of petty cash advantages. What is the difference between a cash book and a petty cash. The main advantages of imprest system of petty cash are as follows. Imprest, petty cash and other revolving funds office of the. This can be handled by a junior member of the staff, making it simpler for management. A book in which bank cash transactions are recorded. Petty cash and the imprest cash float system college. With an imprest system, accountants or bookkeepers track petty cash in the petty cash book. How the imprest system of petty cash book works your business.
This is recorded as a separate account in the companys. Imprest, petty cash and other revolving funds office of. Guidance in this section applies to petty cash, imprest accounts, working funds, advance travel, stamp funds, change funds, or any other revolving funds set aside for facilitating minor disbursements, making change, and similar uses. 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. Petty cash book is maintained to record small expenses such as postage, stationery, telegram.
Causes for difference between cash book balance and pass book balance. Course objectives gain knowledge on how to do your business health check to stay healthy at all time. What are the advantages of using the imprest system. When the account goes below a certain specified amount, the system is replenished. How the imprest system of petty cash book works your. Explain how the imprest system of petty cash book works. A cash book acts like both a journal and a ledger for cash transactions. Jan 26, 2020 in accounting terms, cash usually refers to cash in hand. 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.
At the end of the period a petty cash reconciliation is carried out. Required c i state the amount of cash there should have been in the petty cash box. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. 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. 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 head cashier before funding again examines the previous expenses. Like an imprest bank account, a petty cash fund acts as a control by establishing a limited amount of cash to use for specific types of expenses. 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. The firm may adopt imprest system of maintaining petty cash.