Tag: petty cash book

Questions Related to petty cash book

Imprest system of Petty Cash book is system in which head cashier first estimates the total petty expenses of a particular period say month or fortnight and estimated amount is given to petty cashier in advance to meet petty expenses of particular period.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. True

  2. False

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Correct Option: A
Explanation:

Under imprest system, a round sum of money estimated are necessary for the possible needs of the business to meet petty expenses for the week or fortnight is handed over to the Petty Cashier. At the end of the fixed period or earlier, when petty cashier needs further cash, he submits the petty cash book, along with vouchers.

The Chief Cashier examines the cash book with the vouchers. Then, Chief Cashier gives money/cheques for the exact amount, which he actually spent during the period. Thus, he starts for the next period with the same sum as held previously. That is, the petty cashier will have again the fixed sum in the beginning of the next period. This system is known as Imprest System of Petty Cash Book.

A petty cash book which had many sub-columns on payment side for recording expenses which are repetitive in nature, e.g. postage and telegrams, printing & stationery, carriage & cartage, sundry expenses, etc. is called analytical/columnar petty cash book.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. True

  2. False

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Correct Option: A
Explanation:

In columnar /analytical cash book, various items of petty cash payments are analysed and separate analytical columns are provided for recording each and every item. The amount of cash received from the chief cashier for meeting out the petty expenses is recorded on the debit side and actual cash payments towards various petty items are recorded on the credit side in the total as well as analytical columns. The analytical column is provided for each usual head of expense like postage & telegrams, printing & stationary, carriage & cartage, traveling expenses, entertainment expenses, office expenses, sundry expenses, etc. Subsequently, the totals of these analytical columns are posted to the respective ledger accounts which save the labor used in posting each item of payment separately in the ledger. The balancing of petty cash book is done in the total payments column. Where the debit side (receipts) exceeds that of the credit side ( in the totals column -Payments), it represents the unspent balance of cash remaining with the petty cashier.

Simple petty cash book is not very popular.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. True

  2. False

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Correct Option: A
Explanation:

A simple petty cash book is one in which there is only one amount column on its both sides with common date and particular columns. The debit column is used for entering the balance of cash in hand of the petty cashier at the beginning of the period and the amount received from the head cashier. A simple petty cash book is identical to a cash book. Any cash that a petty cashier receives is recorded on the debit or receipts side and any cash that he pays is recorded on the credit or payments side. In this type of Cash book, all the expenses are recorded in one single column. Due to this, postings of all expenses to respective ledger accounts consume a lot of time. Hence, the Simple Petty Cash Book is not popular because separate columns for various expenses are not maintained. 

In petty cash book________column records receipts.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. extreme left hand

  2. extreme right hand

  3. centre column left hand side

  4. centre column right hand side

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Correct Option: A

The closing balance of the petty cash book is_______.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. Expense/expenditure

  2. Profit/ gain

  3. Assets

  4. Liability

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Correct Option: C
Explanation:

The closing balance of petty cash book is considered as Asset. 

Petty Cash is a current asset account; it is part of a company's cash.

Petty cash Book is just like a cash book , its just that this book maintains petty cash expenses separately as against the normal cash book . 
Therefore, balance of petty cash book is an asset & an not income. Its used for paying out petty expenses.

_________ is the book which is used for the purpose of recording the payment of petty cash expenses.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. Cash book

  2. Bank book

  3. Petty cash Book

  4. Miscellaneous Expenses Book

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Correct Option: C
Explanation:

In every organisation, a large number of small payments such as conveyance, cartage, postage, telegrams and other expenses are made. These are generally repetitive in nature. 

If all these payments are handled by the cashier and are recorded in the main cash book, the procedure is found to be very cumbersome. The cashier may be overburdened and the cash book may be become very bulky. 
To avoid this, large organisations normally appoint one more cashier and maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book. It is used for the purpose of recording the payment of petty cash expenses.

_______does not exist in the three column cash book.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. Cash Column

  2. Bank Column

  3. Petty Cash Column

  4. Discount Column

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Correct Option: C

The balance in the Petty Cash Book represents income.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. True

  2. False

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Correct Option: B

The balance in the Petty Cash Book represents expenses.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. True

  2. False

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Correct Option: B

The balance in the petty cash book is ____________.

elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

  1. an expense

  2. a profit

  3. an asset

  4. a liability

Show answer
Correct Option: C