Imprest System: Concept MCQs Quiz | Class 9
Test your knowledge with this Class IX Elements of Book-Keeping & Accountancy (Code 254) quiz on the Imprest System from Unit 6: Recording and Posting of Cash Transactions. This quiz covers key concepts such as the fixed imprest amount, the reimbursement process, and how the imprest system acts as a control mechanism. Select your answers and click ‘Submit Quiz’ to see your score and download a PDF of your answers.
Understanding the Imprest System for Petty Cash
In any business, there are numerous small, frequent expenses like stationery, postage, courier charges, or tea for guests. Recording each of these tiny transactions in the main cash book would make it cluttered and difficult to manage. The Imprest System of Petty Cash is a practical and efficient solution to handle these minor expenditures.
Key Concepts of the Imprest System
The system is built on a few core principles that ensure convenience while maintaining strict financial control.
1. Fixed Imprest Amount (The ‘Float’)
At the beginning of a period (e.g., a week or a month), the main cashier gives a fixed, pre-determined sum of money to a designated person called the ‘petty cashier’. This initial amount is known as the imprest amount or ‘float’. This amount is estimated based on the likely petty expenses for the upcoming period.
2. Reimbursement Process
The petty cashier makes all small payments from this float and must collect supporting documents like receipts or vouchers for every single expense. At the end of the period, the petty cashier prepares a statement of all expenses and submits it along with the vouchers to the main cashier. The main cashier verifies these expenses and then gives the petty cashier money equal to the exact amount that was spent. This process is called reimbursement. It brings the cash held by the petty cashier back up to the original imprest amount.
Example: If the imprest float is Rs. 2,000 and the petty cashier spends Rs. 1,750 during the month, the main cashier will reimburse Rs. 1,750. The petty cashier will then start the next month with Rs. 250 (remaining cash) + Rs. 1,750 (reimbursement) = Rs. 2,000.
3. A Powerful Control Mechanism
The imprest system is not just about convenience; it’s a strong internal control tool. Here’s how:
- Limited Liability: The petty cashier is only responsible for a small, fixed amount of cash.
- Verification: The main cashier regularly reviews and approves all petty expenses, preventing misuse of funds.
- Documentation: The requirement of vouchers for every payment ensures that all expenses are genuine and properly authorized.
- Surprise Checks: Management can conduct a surprise count of the petty cash at any time. The cash in hand plus the total of the vouchers must equal the original imprest amount.
The Process in Simple Steps
The workflow of the imprest system can be summarized in the following table:
| Step | Action | Description |
|---|---|---|
| 1 | Establish Float | Main Cashier gives a fixed amount (e.g., Rs. 1000) to the Petty Cashier. |
| 2 | Make Payments | Petty Cashier pays for small expenses and collects supporting vouchers. |
| 3 | Record Transactions | All payments are recorded in a special book called the Petty Cash Book. |
| 4 | Request Reimbursement | Petty Cashier submits the Petty Cash Book and vouchers to the Main Cashier. |
| 5 | Verify & Reimburse | Main Cashier verifies the expenses and gives cash equal to the total amount spent. |
| 6 | Restore Float | The Petty Cashier’s cash is now back to the original fixed amount (e.g., Rs. 1000). |
Quick Revision Points
- The Imprest System is designed to manage small, recurring cash expenses.
- It operates with a fixed sum of money called the imprest amount or float.
- The petty cashier is reimbursed for the exact amount spent, not a fixed top-up.
- The float is restored to its original amount after each reimbursement cycle.
- It serves as an effective method of controlling petty cash expenditures and reduces the burden on the main cashier.
Extra Practice Questions
- Why is it inefficient to record petty expenses in the main cash book?
- What would happen if a petty cashier loses a voucher for an expense?
- Can the imprest amount be changed? If so, when and why?
- How does the imprest system help in preventing fraud?
- Differentiate between the roles of the Main Cashier and the Petty Cashier in this system.
