Question

What is Cash Book? In Petty Cash Book arrangement explain the Imprest System.

Hint:

Imprest System = “Fixed float of petty cash is maintained and reimbursed after spending.”

Answer 1

Step 1: Meaning of Cash Book.
A cash book is a subsidiary book of accounts that records all cash transactions—both receipts and payments—on a daily basis. It functions both as a journal and a ledger for cash transactions.
Step 2: Features of Cash Book.
1. It records only cash and bank transactions.
2. It has debit and credit sides, like a ledger.
3. The balance of the cash book always shows a debit balance (since cash cannot be negative).
Step 3: Petty Cash Book.
A petty cash book is a record maintained to track small day-to-day expenses such as postage, stationery, carriage, etc. These expenses are recorded by a petty cashier under a fixed system.
Step 4: The Imprest System.
- Under the imprest system, a fixed amount (say Rs. 5,000) is given to the petty cashier at the beginning of a period (week or month).
- During the period, the cashier spends from this amount on minor expenses and records them.
- At the end of the period, the petty cashier submits vouchers and receipts.
- The amount spent is reimbursed, so that the petty cashier again starts the next period with the same fixed imprest amount.
Step 5: Advantages of Imprest System.
1. Controls petty expenses effectively.
2. Avoids misuse of cash.
3. Saves time of the main cashier.
4. Provides a systematic record of all minor expenditures.
Step 6: Conclusion.
Thus, a cash book records all cash transactions, while the petty cash book (under the imprest system) ensures efficient control over small routine expenses.