Note on Systems of Petty Cash Fund

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The petty cash fund can be operated in the following two ways: -

  1. Ordinary system of petty cash fund
    Under this system petty cashier is given a certain amount of cash for meeting petty expenses of the office, when he spends nearly the whole amount, he submits the amount of expensive along with surplus amount. If necessary he will be given another sum for petty payments for subsequent period.

  2. Imprest system of petty cash fund The world 'impress' means' advance amount' which is personal to certain person to make petty expenses. It is a system of petty cash book where a person is given a fixed amount in the beginning of the period, the petty cashier submits the account of expenses keeping surplus amount himself. The main cashier gives to the petty cashier another sum for the reimbursement of the fund which equals the amount spent by him during the period. Thus, every time petty cashier begins the next period with the same amount of float, under this system, petty cash fund is reimbursed for the petty expenses incurred is called impress systems of the petty cash book.

Considerations for Operating Petty Cash Fund

The office establishes the petty cash fund for paying petty expenses incurred daily. The following factors should be considered carefully by the petty cashier for proper operation of the fund: -

  1. Payment should be made only for petty expenses.
  2. Advance payments should not be made.
  3. Cash payment voucher must be used for every petty payment.
  4. The fund should not be mixed with any other amount received from any source.
  5. Record of petty transactions should be maintained on petty cash account AGF No. 22.
  6. Request for reimbursement of the cash payment from AGF No. 6 (A) must be used for requesting reimbursement of expenditures.
  7. Until reimbursement is made, the expenditures made through petty cash fund should not be posted in the bank cash book.

Forms used for Operating Petty Cash Fund

The following types of forms are used for operating the petty cash fund: -

  1. Cash payment voucher (AGF No. 6)
  2. Cash payment slip and cash control form (AGF No. 7)
  3. Petty cash book/ Petty cash fund account (AGF No. 22)
  4. Request for the reimbursement of cash payment form (AGF No. 6(A))

  • The petty cash fund can be operated in the two ways: ordinary and imprest system of petty cash fund.
  • The office establishes the petty cash fund for paying petty expenses incurred daily. 
  • Under ordinary system, the petty cashier is given a certain amount of cash for meeting petty expenses.
  • Under imprest system, the petty cashier is given a certain amount of cash usually at the beginning of the accounting year. 
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Very Short Questions

Under ordinarysystem, the petty cashier is given a certain amount of cash for meeting petty expenses. When the petty cashier spends nearly the whole amount, he submits the account of expenses along with the surplus amount. If necessary, the petty cashier will be given another sum for petty payments for next periods.

Imprest system of petty cash fund is a more popular system of the petty cash fund. Under this system, the petty cashier is given a certain amount of cash usually at the beginning of the accounting year. At the end of each month, the petty cashier submits the accounts of expenses keeping surplus amount himself. At the beginning of the next month, the main cashier gives the petty cashier another sum which is equal to the amount spent by him during the previous month as reimbursement of the fund. Thus, the petty cashier begins the next period with the same amount of fund, which is known as float. The system in which the petty cash fund is reimbursed for the petty expenses incurred is called imprest system of the petty cash fund.

Imprest system of petty cash fund is better than the ordinary system because:

  • It helps in timely reporting and checking. Thus, the errors, if any, can be rectified by the main cashier soon.
  • It does not allow the petty cashier to keep idle cash with him as the float can be reduced if found more than necessary.
  • It helps ultimately for effective control of the mis-utilization of the petty cash fund.

The office establishes the petty cash fund for paying petty expenses incurred daily. The following factors should be considered carefully by the petty cashier for proper operation of the fund: -

  1. Payment should be made only for petty expenses.
  2. Advance payments should not be made.
  3. Cash payment voucher must be used for every petty payment.
  4. The fund should not be mixed with any other amount received from any source.
  5. Record of petty transactions should be maintained on petty cash account AGF No. 22.
  6. Request for reimbursement of cash payment from AGF No. 6 (A) must be used for requesting reimbursement of expenditures.
  7. Until reimbursement is made, the expenditures made through petty cash fund should not be posted in the bank cash book.

The following types of forms are used for operating the petty cash fund: -

  1. Cash payment voucher (AGF No. 6)
  2. Cash payment slip and cash control form (AGF No. 7)
  3. Petty cash book/ Petty cash fund account (AGF No. 22)
  4. Request for the reimbursement of cash payment form (AGF No. 6(A))

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  • The petty cashier is given a certain amount of cash for meeting petty expenses under ______.

    simple system of petty cash fund
    imprest system of petty cash fund
    ordinary system of petty cash fund
    special system of petty cash fund
  • The petty cashier is given a certain amount of cash usually at the beginning of the accounting year under ______.

    simple system of petty cash fund


    special system of petty cash fund


    imprest system of petty cash fund


    ordinary system of petty cash fund


  • Imprest system of petty cash fund is better than the ordinary system because ______.

    It helps in timely reporting and checking. Thus, the errors, if any, can be rectified by the main cashier soon.


    It helps ultimately for effective control of the mis-utilization of the petty cash fund.


    It does not allow the petty cashier to keep idle cash with him as the float can be reduced if found more than necessary.


    all the options are correct


  • The office establishes the petty cash fund for paying petty expenses incurred ______.

    weekly
    monthly
    daily
    annually
  • Which one of the factor should be considered carefully by the petty cashier for the proper operation of the fund?

    Payment should be made only for petty expenses.
    The fund should not be mixed with any other amount received from any source.
    Advance payments should not be made.
    All the options are correct
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