Understand the concept of imprest system - class-IX

A cash book records all cash receipts and payments (i). It does not record credit transactions (ii). It records cash discounts, but usually in a separate column, not as a general rule for all cash payments (iii). Thus (i) and (iii) are generally accepted in accounting contexts.

A petty cash book can be viewed as a memorandum record for small expenses or as part of the formal double-entry system depending on the organization's accounting policy.

The petty cash book is used for small cash payments. It does not record cheques, which are handled in the main cash book or bank book.

Petty cash fund is supposed to be replenished at the end of every accounting period.

The imprest system is an accounting method where the petty cash balance is restored to a fixed amount at the start of each period by reimbursing the exact amount spent.

When the main cashier advances money to the petty cashier, it is a payment from the main cash book, so it is recorded on the credit side of the main cash book.

The petty cash book is a formal summarization of petty cash expenditures, sorted by date. In most cases, the petty cash book is an actual ledger book, rather than a computer record.

A petty cash book is often used as a memorandum book to track small expenses before they are summarized and posted to the main ledger.

There are two kinds of cash book i.e. Main Cash Book and Petty Cash Book. Petty cash book is used to record small value expense items.

A large number of small payments are recorded in separate cash book such a cash book is maintained by petty cashier is called as petty cash book. The petty cashier works on the "Imprest system" under this system a definite amount is given to petty cashier at the beginning of certain period. This amount is called "Imprest amount". The petty cashier makes small payments out of this imprest amount, when he spent substantial amount he gets reimbursement of amount spent from head cashier.

Petty cash system is used to pay small day to day expenses on daily basis. A sum of total spent amount is transferred to cash book and expense account for a particular period rather than recording each individual small transaction.

Under imprest system, a round sum of money estimated are necessary for the possible needs of the business to meet petty expenses for the week or fortnight is handed over to the Petty Cashier. At the end of the fixed period or earlier, when petty cashier needs further cash, he submits the petty cash book, along with vouchers.

In columnar /analytical cash book, various items of petty cash payments are analysed and separate analytical columns are provided for recording each and every item. The amount of cash received from the chief cashier for meeting out the petty expenses is recorded on the debit side and actual cash payments towards various petty items are recorded on the credit side in the total as well as analytical columns. The analytical column is provided for each usual head of expense like postage & telegrams, printing & stationary, carriage & cartage, traveling expenses, entertainment expenses, office expenses, sundry expenses, etc. Subsequently, the totals of these analytical columns are posted to the respective ledger accounts which save the labor used in posting each item of payment separately in the ledger. The balancing of petty cash book is done in the total payments column. Where the debit side (receipts) exceeds that of the credit side ( in the totals column -Payments), it represents the unspent balance of cash remaining with the petty cashier.

A simple petty cash book is one in which there is only one amount column on its both sides with common date and particular columns. The debit column is used for entering the balance of cash in hand of the petty cashier at the beginning of the period and the amount received from the head cashier. A simple petty cash book is identical to a cash book. Any cash that a petty cashier receives is recorded on the debit or receipts side and any cash that he pays is recorded on the credit or payments side. In this type of Cash book, all the expenses are recorded in one single column. Due to this, postings of all expenses to respective ledger accounts consume a lot of time. Hence, the Simple Petty Cash Book is not popular because separate columns for various expenses are not maintained. 

In a petty cash book, the receipt of the imprest amount is recorded in the first column on the left side, while payments are recorded in subsequent columns.

The closing balance of petty cash book is considered as Asset. 

In every organisation, a large number of small payments such as conveyance, cartage, postage, telegrams and other expenses are made. These are generally repetitive in nature. 

A three-column cash book contains columns for cash, bank, and discount. Petty cash is maintained in a separate book.

The balance in the petty cash book represents the cash on hand, which is an asset, not income.

The balance in the petty cash book represents cash on hand, which is an asset, not an expense.

The balance of cash held by the petty cashier is an asset of the business.

Petty cash is used for small, frequent expenses like postage, stationery, conveyance, and tea/coffee.

The balance in the petty cash book represents the cash remaining, which is an asset.

The petty cashier typically operates under the imprest system, where they are reimbursed for the exact amount spent to return to the original float.

A petty cash book can be treated as either a memorandum record or as part of the formal double-entry system depending on the accounting practices of the firm.

Small, frequent payments are recorded in the petty cash book to keep the main cash book uncluttered.

The imprest system simplifies petty cash management by providing a fixed float, saving time for the chief cashier, and reducing the risk of fraud by requiring documentation for reimbursements. It also streamlines accounting by grouping small, frequent expenses.

Petty cash is intended for small, routine business expenses. Allowing staff to take loans, even small ones, is a misuse of business funds and violates internal control principles.

The balance in a petty cash book represents the cash remaining on hand, not the amount spent. The amount spent is the difference between the initial imprest and the current balance.

Petty cash is an asset (cash on hand), not an expense. The individual payments recorded within the petty cash book are the expenses.

The petty cash book is a book of original entry that forms part of the double-entry system, as it records cash transactions that are eventually summarized and posted to the general ledger.

An analytical petty cash book uses multiple columns (tabular/columnar form) to categorize different types of expenses, such as postage, stationery, and travel, for easier posting to the ledger.

As noted previously, using petty cash for staff loans is a violation of financial controls and is not a legitimate use of the fund.

Option A is correct .

The imprest system is followed in petty cash book where a fixed amount (imprest) is maintained. The cashier reimburses the amount spent to restore the balance to the fixed imprest level.

A contra entry occurs when a transaction affects both the cash and bank accounts, requiring an entry on both sides of the cash book.

Petty cash represents cash held by the business, which is classified as a current asset on the balance sheet.

Under the imprest system, the amount reclaimed is equal to the total expenditure incurred. Expenditure = 150 (travel) + 250 (subsistence) = 400. Note: Income (sales of stamps/paper) reduces the amount needed for reimbursement. Total reimbursement = 400 - 10 - 50 = 340.

The reimbursement amount is equal to the total expenses incurred during the period. Total = 150 + 50 + 30 + 100 = 330.

Under the imprest system, the cashier is reimbursed for the exact amount spent to restore the fund to its original balance. If 860 was spent, 860 is needed to return to 1,000.

Small, frequent expenses like postage stamps are typically recorded in the petty cash book rather than the main cash book or journal.

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. 

Petty cash book in which the payment side is ruled in suitable columns is called as Analytical Petty Cash Book. In this type of petty cash book, on the payment (credit) side, a separate column is provided for each class of common expenses. The number of column depends on the nature of business and type of expenses. A small business will need lessee columns and a large business needs more columns. Expenses that cannot be designated to any class of expenses are entered in the column named sundry expenses.

Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fare, fuel, etc. These small expenditures are usually paid using coins and currency notes rather than checks. The person responsible for spending petty cash and recording it in a petty cash book is known as petty cashier.