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Petty Cash Fund

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The petty cash fund is an amount, which is maintained by government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. These types of expenditures occur in government offices frequently. For making payment of such small amount of expenditures in cash, a fund is created by the office, which is known as petty cash fund. All the petty expenses are paid through this fund. These expenses are recorded in a separate book systematically which is known as petty cash book. It has been designed under the format of AGF No. 22.

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At the beginning of the fiscal year, the petty cash fund is created. At the end of each month, the petty cash fund is reimbursed. At the end of the fiscal year, the petty cash fund is closed by depositing the surplus amount in the bank.

Systems of Petty Cash Fund

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

  1. Ordinary system of petty cash fund
    Under this system, 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.

  2. Imprest system of petty cash fund
    It 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 misutilization of the petty cash fund.



  • The petty cash fund is an amount, which is maintained by government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. 
  • Under ordinary system of petty cash fund, the petty cashier is given a certain amount of cash for meeting petty expenses. 
  • Under imprest system of petty cash fund, 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

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

    special system of petty cash fund


    simple 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 ______.

    all the options are correct


    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 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.


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

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

    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
    Payment should be made only for petty expenses.
  • Petty cash book is designed under the ______.

    AGF No. 22
    AGF No. 9
    AGF No. 5
    AGF No. 19
  • At the ______ of the fiscal year, the petty cash fund is created.

    ending


    beginning


    middle


    termination


  • Which one of them is not the objective of petty cash fund?

    To facilitate for posting
    To spent time
    To facilitate for controlling petty expenses
    To facilitate for keeping records
  • Which one of them is not the importance and advantage of petty cash fund?

    Errors, if any, cannot be located and rectified easily.
    Expenses can be paid in cash immediately.
    Posting petty transactions in the bank cash book and budget sheet.
    Make a record of all petty payments systematically.
  • The petty cash fund is an amount, which is maintained by the government office for making payments of small expenditures like ______.

    newspapers
    all the options are correct
    postal stamp
    refreshment
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