Theory question 102
Petty Cash(a) Explain the Operation of Petty Cash Book using imprest system.
(b) Outline two disadvantages of the imprest system of book keeping in petty cash book.
(c) State four uses of Petty Cash Voucher.
Show the model answer
(a) The chief cashier gives the petty cashier a fixed float (imprest) for small payments. Each payment is supported by a voucher and recorded in the analysed petty cash book. At the end of the period the book is totalled and the chief cashier refunds exactly the amount spent, restoring the float to the imprest.
(b) Any two: the float may be too small for unexpected needs; risk of misuse or fraud by the petty cashier; extra work in analysis and vouchers; small payments may be split to avoid authorisation limits.
(c) Any four: evidence of payment; authorisation of the payment; source document for the petty cash book; helps classify expenses; supports audit and checking; helps calculate the reimbursement.
Explain the float and its restoration, then weaknesses and uses of vouchers.