A petty cash book is a semi-cash book used to record expenses of little value to the entity and that occurs frequently. The expenses to be classified as little value depense on the materiality threshood of the entity.
Some big entity materiality threshood may be a million Naira or more. A small business materiality threshood may be ten thousand naira. Also, the frequency of occurance of such expenses is taken into considerations. Expenses that are made everyday are the ones that are entered in the petyy cash book.
The petty cash book is an analystical book were all the expenses are grouped according to their nature and types. Expenses can be grouped into stationery, travelling expenses, ledger account balances, lighting, etc.
Petty cash should never be overlook because a little drop of water is said to fill an ocean. Therefore, effective internal control should be applied. A supprise cash count should be done on intervals.
Imprest system is the totality of procedures used for petty cash transactions. It includes imprest, cash float and retirement.
This is the total amount that can be controlled by a petty cashier.
This is the amount given to the petty casher to recoup expenses made during a period.
Retirement is an expenses that is no longer classified as petty cash. Such expense is reclassified to the main cash book.
ADVANTAGES OF IMPREST SYSTEM
(1) It trains the petty cashier who is a junior staff, to be responsible when it comes to money.
(2) It enable the junior staff to learn accuracy of accounting before weightier reponsibility is given to him or her.
(3) It reduces the responsibilities and time of the main cashier.
(4) The main cash book will not be stressed with payment of items with low amount.
(5) It is easy to monitor and analyse expenses in the petty cash book.
(6) The number of accounts to be opened in the ledger accounts is reduced.