Tag: petty cash book

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Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Petty cash may be used to pay ______________________.

  1. The expenses relating to passages and conveyance

  2. Salaries and wages to the manual staff

  3. For the purchase of furniture and fittings

  4. None of these.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Fixed assets are __________________.

  1. Kept in the business for use over a long time of earning income

  2. Meant for resale

  3. Meant for conversion into cash as quickly as possible

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 A fixed asset is a long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income. Fixed assets are not expected to be consumed or converted into cash within a year. Fixed assets most commonly appear on the balance sheet as property, plant, and equipment (PP&E).

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Petty Cash Book may be treated as a __________________.

  1. Part of the double entry system

  2. Merely as a memoranda book

  3. Either (A) or (B)

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

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.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Payments in cash of small amounts like travelling expenses, postage, carriage etc. are recorded in the ________________.

  1. Main Cash book

  2. Petty cash book.

  3. Cash budget

  4. Journal proper
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

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

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Which of the following is/are advantages of the imprest system?

  1. It saves the time of chief cashier

  2. It reduces the chances of misuse of cash by the petty cashier.

  3. It enables a great saving to be effected in the posting of small items to the ledger accounts.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Which of the following by is incorrect?

  1. Every payment made by the petty cashier should be supported by evidence.

  2. Regularly petty cashier is reimbursed to make up his cash balance to the imprest.

  3. The petty cash book could be either a subsidiary book or a main book of accounts.

  4. In emergency the petty cashier may give staff loans of small amounts.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

State with reasons whether the following statement is true or false:
The balance in the petty cash book represents the amount spent.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

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.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

State with reasons whether the following statement is true or false:
Petty cash is an expense.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

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