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13 Accounting: Petty Cash Book and the Imprest System

By John Jones,2014-05-05 13:44
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13 Accounting: Petty Cash Book and the Imprest System

    53063025.doc Page 1/5 13 Petty Cash Book and the Imprest System

I. Introduction

    Besides the main cash book, a large firm may keep a separate cash book for small cash payments.

    This separate cash book is called a petty cash book,

II. The Imprest System

    Under this system, the cashier (the person who keep cash and the cash book for the company) gives

    the petty cashier enough cash for him to meet small cash payments for the period. At the end of the

    period, the cashier reimburses the petty cashier the amount equal to the money spent. Therefore, the

    petty cash in hand at the beginning of each period is always the same.

     1. Enough cash (Imprest amount)

    Cash Book Petty Cash Cashier Book Cashier

     3. Reimburses the amount spent ($X) 2. Paid for many minor expenses (total = $X)

Example:

    Reimbursed amount = Spent amount

    $Period 1The cashier gives the petty cashier100*

    The petty cashier apys out in the period78

    Petty cash now in hand22

    The cashier now reimburses the petty cashier the amount spent( )

    Petty cash in hand at the end of period 1( )*Period 2The petty cashier pays out in the period84

    Petty cash now in hand16

    The cashier now gives the petty cashier the amount spent.( )

    Petty cash in hand at the end of period 2( )*

    * This fixed sum ($100) is called Cash float or the imprest amount. Sometimes, this

    amount may be increased to meet the need of small cash payments.

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    Question 1

    The imprest system is used in Kongs petty cash book. On 30 June 19-1, the last day of the month, the balance of the book amounted to $32. The cashier paid back (reimbursed) $168 to the petty

    cashier on that day.

    (a) Find the cash float of the system

    (b) Find the new float if $100 was to be added to the float in July.

    (c) At the end of July, the balance was $47. How much was the petty cashier reimbursed?

Solution:

    Cash float = $( ) + $( ) = $( )

    New cash float =

    Amount reimbursed =

III. Format of a Petty Cash Book

    ReceiptsDate DetailsTotalStationeryPostageCleaning TravellingSundriesLedger A/C

    $$$$$$$$

    Analysis of expenses

    IV. Example 1 Reimbursement takes place at the beginning of each month

    Mr. Chan keeps his petty cash on the imprest system the imprest amount being $1000. The petty

    cash transactions for the month of May 19-6 were as follows:

May 1Petty cash in hand $400

     1 Petty cash restored to imprest amount.

     6Bought pencils $60

     7Paid wages $90

     14Bought stamps $25

     20 Paid to Mr. Lee, a creditor, $100

     21Paid wages $70

     25Bought envelopes $15

     28Bought notepaper $20

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    Solution:

ReceiptsDate DetailsTotalStationeryWagesPostageLedger A/C

    $19-6$$$$$

    400May 1Balance b/d

    600 1Cash (reimbursed)

     6Pencils6060

     7Wages9090

     14Stamps2525

     20 Mr. Lee100100

     21Wages7070

     25Envelopes1515

     28 Notepaper2020

    3808016040100

    31 Balance c/d620

    Totals transferred to the accounts in the10001000

    general ledger at month end620June 1 Balance b/d

    380 1Cash

    Cash book (Cash Column Only)

    $19-6$

    May 1Petty cash600

    June 1Petty cash380

General Ledger

    Stationery 19-6$$

    May 31 Petty Cash80

General Ledger (cont)

    Wages19-6$$

    May 31 Petty Cash160

    Postage19-6$$

    May 31 Petty Cash40

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    Purchases Ledger (Creditors)

    Mr. Lee19-6$19-6$

     May 20Petty cash 100May 2Purchases100

    V. Example 2 Reimbursement takes place at the end of each month.

    Mr. Chan keeps his petty cash on the imprest system the imprest amount being $1000. The petty

    cash transactions for the month of May 19-6 were as follows:

May 1Petty cash in hand $1000

     6Bought pencils $60

     7Paid wages $90

     14Bought stamps $25

     20 Paid to Mr. Lee, a creditor, $100

     21Paid wages $70

     25Bought envelopes $15

     28Bought notepaper $20

     31Petty cash restored to imprest amount

    Solution:

ReceiptsDate DetailsTotalStationeryWagesPostageLedger A/C

    $19-6$$$$$

    1,000May 1Balance b/d

     6Pencils6060

     7Wages9090

     14Stamps2525

     20 Mr. Lee100100

     21Wages7070

     25Envelopes1515

     28 Notepaper2020

    3808016040100

    380 31Cash

     31 Balance c/d1000

    1,3801380Totals transferred to the accounts in the

    general ledger at month end1,000June 1 Balance b/d

Ledger accounts are same as example 1

    53063025.doc Page 5/5 VI. Classification / Analysis of expenses

Accounts / Column Examples

    Stationery Pencils, envelopes, paper, staplers, clips Motor expenses Petrol, driving licenses Postage Envelopes, stamps

    Sundry expenses Cleaning, small donation, newspaper Travel expenses Taxi fares, MTR ticket, bus fare Entertainment expenses Restaurant bill

VII. Advantages of the Imprest System

1. The money in the hands of the petty cashier is limited to the imprest amount. This avoids cash

    stolen.

    2. By reimburses the petty cashier regularly, the cashier can keep a watch on the amount spent by

    the petty cashier.

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