The best method of maintaining petty cash is known as the imprest system. Under this method, an amount estimated as necessary for the possible needs of the business to meet petty expenses for the week or the month is drawn by a cheque and handed over to the petty cashier. At the end of the fixed period, the petty cash book after being totaled and balanced is presented by the petty cashier to the chief cashier for a fresh cheque. The cashier after satisfying himself as to the correctness of the record, issue a cheque for the exact amount expended. The amount of this cheque together with the unspent balance will restore in the hands of the petty cashier the original sum with which he started. This is called the imprest system of petty Cash.
ADVANTAGES OF THE IMPREST SYSTEM
The advantages of the imprest system of book keeping in business for maintaining petty cash with examples are as follows:‑
- The main advantages of this system is that it imposes a duty on the chief Cashier
to make subsequent advances after examining the vouchers. This procedure gives a moral check to the petty Cashier who must prepare the vouchers and petty Cash Book Correctly.
- As the petty Cashier cannot draw as and when he likes to prevents sun-necessary
accumulation of cash in his hand and thus chances of fraud can be minimized.
- By the use of this system it saves an enormous amount of un-necessary labour
resulting from posting each item of petty payment separately in the ledger.
- Under this system, the probable amount of petty expenses for a stated period is
fixed beforehand. So the Petty Cashier will try to be economical, since he will have to meet all the petty expenses of the period with the amount of cash lying with him.
- Since the amount of cash with the Petty Cashier can never exceed the Imprest Cash, the working capital of business is not unnecessarily locked up.
Similar Accounting Articles:
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- SHORT ANSWER QUESTIONS SUB DIVISION OF JOURNAL CASH TRANSACTIONS 2
- SHORT ANSWER QUESTIONS SUB DIVISION OF JOURNAL CASH TRANSACTIONS
- CASH BOOK
- THE IMPREST SYSTEM