Tag: understand the concept of imprest system

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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 postage and conveyance

  2. Salaries and wages to the final staff

  3. For the purchase of furniture and fittings

  4. Other recurring expenses
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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 petty cash fund is a small amount of cash kept on hand to pay for minor expenses, such as office supplies or reimbursements. A petty cash fund will undergo periodic reconciliations, with transactions also recorded on the financial statements.

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 prepared on imprest system is_________.

  1. Two column cash book

  2. Cash book

  3. Petty cash book

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

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.

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 word "Petty" is derived from ______________.

  1. French word

  2. German word

  3. Latin word

  4. Greek word
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A Correct answer
Explanation

Petty is a french word which means small. So petty cash book has come into existence which records small amount transactions. Hence, petty is the derivation of the french word.

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 term "Imprest system" is used in relation to ____________.

  1. Purchase book

  2. Sales book

  3. Cash book

  4. Petty cash book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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.

This is also known as imprest account.

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

Imprest system of Petty Cash book is system in which head cashier first estimates the total petty expenses of a particular period say month or fortnight and estimated amount is given to petty cashier in advance to meet petty expenses of particular period.

  1. True

  2. False
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A Correct answer
Explanation

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.

The Chief Cashier examines the cash book with the vouchers. Then, Chief Cashier gives money/cheques for the exact amount, which he actually spent during the period. Thus, he starts for the next period with the same sum as held previously. That is, the petty cashier will have again the fixed sum in the beginning of the next period. This system is known as Imprest System of Petty Cash Book.

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

A petty cash book which had many sub-columns on payment side for recording expenses which are repetitive in nature, e.g. postage and telegrams, printing & stationery, carriage & cartage, sundry expenses, etc. is called analytical/columnar petty cash book.

  1. True

  2. False
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A Correct answer
Explanation

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.

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

Simple petty cash book is not very popular.

  1. True

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

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. 

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

In petty cash book________column records receipts.

  1. extreme left hand

  2. extreme right hand

  3. centre column left hand side

  4. centre column right hand side
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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.

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 closing balance of the petty cash book is_______.

  1. Expense/expenditure

  2. Profit/ gain

  3. Assets

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

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

Petty Cash is a current asset account; it is part of a company's cash.

Petty cash Book is just like a cash book , its just that this book maintains petty cash expenses separately as against the normal cash book . 
Therefore, balance of petty cash book is an asset & an not income. Its used for paying out petty expenses.