WAEC Accounting 2021 Theory — Question 2

Model answer

(a) Operation of the petty cash book based on the imprest system: a petty cash book is opened and handed over to the petty cashier; a particular amount is set aside for small expenses such as stationery and transport; all petty expenses are removed from this amount and recorded in the petty cash book; at the end of a period, or when the petty cashier needs reimbursement, the petty cash book is handed to the main cashier for examination; the petty cashier is then reimbursed to restore the original imprest amount; at the end of the accounting year, the balance on the petty cash book is transferred to the main cash book. (b) Disadvantages of the imprest system: it may at times require employing an extra person to handle the petty cash book; it is prone to fraud. (c) Uses of a petty cash voucher: it is used to record petty expenses; it is used to record re-occurring expenses; it serves as a book of original entry; it relieves the main cashier of handling small transactions.