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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

Which of the following is an advantage of the imprest system of petty cash?

The imprest system limits the cash held by the petty cashier and makes checking easy, because cash in hand plus vouchers for payments always equals the fixed imprest. It does not remove the need for vouchers, allow unlimited spending or avoid recording reimbursements.

  1. AIt eliminates the need for any vouchers for petty payments
  2. BIt allows the petty cashier to spend unlimited amounts
  3. CIt limits the cash held by the petty cashier and makes periodic checking of the petty cash balance easyCorrect
  4. DIt removes the need for the head cashier to record reimbursements

Explanation

At any time, cash in hand plus vouchers for payments should equal the imprest, which makes checking easy and limits the amount of cash at risk. Vouchers are still required, spending is limited to the imprest and the head cashier still records every reimbursement.

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