Petty Cash Book

Question 1

Explain the purpose of a petty cash fund.

Answer 1

It is a small sum of money used to pay for low-value expenditure.

Question 2

Explain the workings of the imprest system.

Answer 2

At the beginning of the period, a fixed sum of cash known as the imprest or float is set aside.
At the end of the period, the petty cash fund will be reimbursed to restore the fund to the original imprest amount.

Question 3

State the advantages of using the petty cash fund/ imprest system.

Answer 3

1. Avoids overcrowding of the Cash Book with small payments

2. Helps to deter fraud as there is a separation of duties between the chief cashier and the petty cashier.