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

Postage stamps purchased for Rs. 30 by business. This transaction will be recorded in ________________.

  1. Purchase book

  2. Cash book

  3. Petty cash book

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

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

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 the 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

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. 

At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. 

The imprest system of petty cash is used by most of the companies because of the following advantages:

1. The imprest system reduces the chances of misuse of cash because the float can be immediately reduced is it is found to be more adequate for the agreed period. 
2. Under this system, the chief cashier periodically checks the record of petty cash. If an error is committed by petty cashier, it can be detected and rectified soon. 
3. It saves the time of the firm's chief cashier who is usually a busy person with heavy responsibilities of handling large receipts and payments by cash and checks.
4. There are little to no chance of misappropriation of cash by the person in charge because the imprest sum is usually very small.

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

Cash book in which the payment side is ruled in suitable columns is ____________.

  1. Petty cash book

  2. Imprest cash book

  3. Analytical cash book

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

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.

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

The petty cashier generally works on ______system. 

  1. Balancing

  2. Accrual

  3. Matching

  4. Imprest
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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. 


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. 

At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. 
The total cash spent by the petty cashier during the period is reimbursed to him and the total cash available to spend at the start of the next period becomes equal to the original sum. Hence, the petty cashier generally works on imprest system.