Imprest Petty Cash – the Main Principle of Petty Cash System!

What is a petty cash? They say that a petty cash is a small cash amount dedicated for small amount purchases that requires a more simple operation that writing a check. Petty cash fund is a widespread term in a petty cash system. The person using the petty cash system is called the petty cash custodian.

Here is an example of using a petty cash. Imagine you are travelling and you stand in a hotel. You have to pay for a parlor maid service – so you can use your petty cash fund leaving her a petty cash check. Or you’ve ordered pizza and you can use your petty cash to pay for the goods delivered to you house.

They say that the limit petty cash amount is $100. In fact it can vary depending on the organization, department or person holding this account. One may have a $40 account while others make a $300 one. It doesn’t matter what amount of the petty cash you have. The main point is to cover all your expenses by replenishment the check you’ve spent.

What does it the petty cash replenishment means? One – the custodian - is to replenish the petty cash fund. He gets the cash from the certain company checking account getting the cash sum similar to the general ledger account cash amount. For example, let’s invent the company called “Matilda”. Its petty cash fun makes out some $200. Nick is the company’s employee that is responsible for its petty cash transactions. He is to have $200 in cash or petty cash receipts every time. For example, he has $30 in hand and $170 in receipts. It’s natural that $0 is not enough for him. So he makes a request from the company’s checking account of $170. The replenishment means that the cash will return to the initial sum.

Reading this information you may ask what petty cash receipts are. Well, it is a form used as a docket showing the payment made from a petty cash account. These receipts can be purchased from the stores of office supplies. There they can be also called vouchers. That kind of vouchers should have an area for the date, the paid amount, the space for the indication of the name of the person that takes the cash from the petty cash fund, they often are numbered for better control over the petty cash operations. Other documents showing the payment should go with the petty cash receipt. Once the petty cash account is replenished, that kind of receipts now show the information on the replenishment process too.

So, now you know what petty cash is, so, what is the imprest petty cash? Imprest petty cash system means that the general petty cash ledger account stays inactive. It means that if you spend $100 from the petty cash balance you will be requested to cover these expenses immediately by the end of the month. Imprest cash may be presented by cash or receipts. When the currency is reduced in the petty cash account you get the request to replenish the spend coins and currency. Once it is drawn the cash account is credited again. Thus, the general ledger petty cash account doesn’t take part in the replenishing process. According to the main rules of the petty cash system (though lots of companies have their own rules) every time the custodian is to cover his expenses up to $100 combination of coins, currency and vouchers.

This operation is always under control due to the vouchers going with every check showing the sum that is to be replenished. Thus every voucher shows the replenishment information while every check indicated how much one should replenish.

As you see that kind of a load – Imprest petty cash loan – is rather comfortable for expenses of a small amount nature. That’s why lots of people choose this system as it helps not to become a bankrupt, watches the monetary processes, shows all the operation features and is considered to be the best way of corporative expenses if speaking about several establishments, companies and other office stuff.
If you need to define gross income , you will have to account your adjusted gross income first.

Tags: Money system cash petty

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2010-Nov-10 15:11 Andrew Jackson [Phoenix]

Learn what petty cash means, its main principles of work, advantages and nuances, petty cash terms and definitions and discover the world of Imprest petty cash conditions.

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