(a) Explain the Operation of Petty Cash Book using imprest system.
(b) Outline two disadvantages of the imprest system of bookkeeping in petty cash book.
(c) State five uses of petty cash voucher.
Explanation
(a) Explanation of the Operation of Petty Cash Book Using the Imprest System: -The imprest system of keeping the petty cash book is a method where the petty cashier is given a fixed sum of money called cash float by the main cashier or the accountant periodically; -The cash float is used to pay for small/minor expenses, -The petty cashier is reimbursed at the end of the estimated period with the amount spent over the period to restore the amount to its original position,-The petty cashier then commences the new period with the same amount as it was at the beginning of the previous period.
(b) Disadvantages of the Imprest System of Keeping Petty Cash Book: (i) The operation of the system is time-consuming; (ii) It is tedious to record repetitive small expenses over a period of time; (iii) The cash float may not always meet the total expenses for the period; (iv) It creates additional administrative cost to the business; (v) The system can be easily abused. (c) Uses of Petty Cash Voucher: It is used- (i) as authority to disburse money; (ii) by the main cashier as basis for reimbursement; (iii) as a reference point for investigation; (iv) as a means of ensuring accountability of the petty cashier/evidence of payment; (v) for classifying expenses;(vi) as a besis control (vii) as a besis for entering up the payments column in the petty cash book/source document; (viii) by auditors to verify petty cash transactions.