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Hallo,
Related to the following example:
B operates the imprest system for petty cash. At 1 July there was a float of $150, but it was decided to increase this to $200 from 1 August onwards. During July, the petty cashier received $25 from staff for using the photocopier and a cheque for $90 was cashed for an employee. In July, cheques were drawn for $500 for petty cash.
What was the total expense paid from petty cash in July?– am I understanding correctly:
1. a float of 150 – is money put into the imprest system
2. 25 – is money received in the imprest system
3. 90 – is money taken out of the imprest system
4. 500 – is money taken out of the imprest systemIs this correct? Probably not, because the answer is 385. Obviously I don’t understand why a cashed cheque is not money taken out of the imprest system, but money received.
Thank you!
Cheques are money taken out of the bank.
When more petty cash is needed, we take money out of the bank (by writing a cheque) and put the month into petty cash.
Hallo,
I have a question to this example, this is the answer:
Petty cash balance at 1 July 150
Photocopies receipts 25
Cheque cashed (90)
=85
Cheques drawn for cash 500
=585
Petty cash balance at 1 August (200)
=Cash paid out for expenses 385My Q: If the new float of 200 is valid from 1 August, this means at 31st of July we still have a float of 150, why do they use the 200 as closing balance and not 150 instead?
Thank you!
The float at 1 August must obviously be the same as the float at 31 July.
Hallo,
For me 31st of July is a different day from 1st of August, I don’t understand why it should be the same, or this is something in accounting which works like that.
Because, I think if we sign a contract with certain terms, they will be valid until 31st, and from 1st we have new terms, I can’t apply the new terms to old period, nor vice versa.
Thank you!
But we haven’t signed a contract for anything.
The cash left at the end of 31 July must be the same as the cash at the start of 1 August. (We do assume that nobody came in the middle of the night and stole some!!!)
If you go to bed tonight with $10 in your pocket, how much do you have in your pocket when you wake up tomorrow morning??
Hallo,
Ok, so I’ll keep in mind what you say, the cash we have available when we close, should be the same as when we open, assuming no theft. Which is actually how we learn it, closing balance should be the same as the opening, and the other amount after what is left, is what we’ve spent.
Thank you!
Can you please explain why a cheque cashed (90) is negative? what does it mean?
Thank you
“Cashing a cheque” is when the company needs more petty cash and therefore takes money out of the bank and puts it into petty cash. So there is less in the bank account and more in petty cash.
(It is a bit of an old-fashioned way of doing it these days – they used to write themselves a cheque and take it to the bank in order to get cash from the bank.)
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