Topic 9: Petty Cash

Question 1

1. What is the imprest system?

Answer 1

It is a system of recording small amount payments of frequently occurring items in a petty cash book. A fixed amount called the ‘float’ is maintained to make small payments for a given period. At the end of the month, a top-up will be made to make the ‘float’ back to the original amount.

Question 2

2. What are the advantages of the Imprest System?

Answer 2

● Useful in controlling and monitoring the flow of petty cash payments.
● Avoids overcrowding of the Cash at Bank account in the ledger with no petty items.
● There will be safety and accountability as the petty cash is under the care of the Petty Cashier who needs to get the top-up from the Chief Cashier.

Question 3

3. Why is Petty Cash Fund needed?

Answer 3

It is used to make small payments. As the amount needed is small and often immediate, it is more practical and convenient to pay through petty cash rather than cheques.

Question 4

4. What is the purpose of Petty Cash Book?

Answer 4

It is a Journal used to record payments made from the petty cash fund.

Question 5

5. What is the source document used for petty cash payment?

Answer 5

Petty cash voucher