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

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.

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 can be treated as _____________.

  1. register

  2. memoranda book

  3. part of double entry system

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

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.

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

What is an analytical petty cash book?

  1. Petty cash book formed in columnar form

  2. Petty cash book formed in tabular form

  3. Petty cash book formed In arithmetic form

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

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.

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 statements is incorrect?

  1. In emergency the Petty Cashier may give staff loans of small amounts

  2. The Petty Cash Book could be either a subsidiary book or a main book of accounts.

  3. Every payment made by the Petty Cashier should be supported by evidence

  4. Regularly Petty Cashier is reimbursed to make up his cash balance to the imprest
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

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

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

If the debit and credit aspects of a transaction are recorded in the cash book it is a:

  1. Contra entry

  2. Simple entry

  3. Double entry

  4. Single entry
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Option A is correct .

Contra Entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, contra entry will be recorded on the credit side and vice-versa.

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, the system followed ______________.

  1. Accrual system

  2. Impress system

  3. Cash system

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

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.