The Effect Of Imprest System On Cash Management

Project and Seminar Material for Accountancy / Accounting

The Effect Of Imprest System On Cash Management


Abstract


This study was carried out to examine the effects of imprest system on cash management using selected small business firms in Calabar. To achieve this objective, three research questions and one research hypothesis were formulated to guide this study. The data collected were analyzed using simple percentages and tables to analyze research questions and Chi-square statistical tool was used for testing of research hypotheses using Statistical Package for Social Sciences (SPSS) software. A structured questionnaire was used as the major instrument for data collection from the staff of selected small business firms in Calabar. After careful analysis of the data, the following findings were revealed that; the effect of imprest system on cash management is effective. The study was concluded with some recommendations that the petty cash float should be reviewed to ensure there should not be too frequent disbursement of petty cash which means that the initial establishment of the float is too low. It’s good to review the past three to six months petty cash disbursement before establishing the petty cash float.


Table of Contents


  • Cover Page
  • Title Page
  • Certification
  • Dedication
  • Acknowledgment
  • Abstract
  • Table of Content

Chapter One:

Introduction

  • 1.1 Background to the Study
  • 1.2 Statement of the Problem
  • 1.3 Objectives of the Study
  • 1.3 Research Questions
  • 1.4 Significance of the Study
  • 1.5 Research Hypothesis
  • 1.6 Scope of the Study
  • 1.7 Limitations of the Study
  • 1.8 Definition of Terms

Chapter Two:

Review of Related Literature

  • 2.1 Introduction
  • 2.2 Conceptual Clarifications
  • 2.2.1 Cash Concept
  • 2.2.2 Cash Management Concept
  • 2.3 Petty Cash Imprest System
  • 2.4 How Petty Cash Imprest System Works
  • 2.5 Characteristics of Petty Cash Imprest System
  • 2.6 Record-Keeping Controls
  • 2.7 Cash Management

Chapter Three:

Research Methodology

  • 3.1 Introduction
  • 3.2 Research Design
  • 3.3 Area of the Study
  • 3.4 Population of the Study
  • 3.5 Sample Size and Sampling Technique
  • 3.6 Sources of Data
  • 3.7 Method of Data Collection
  • 3.8 Method of Data Analysis

Chapter Four:

Presentation, Analysis and Interpretation of Data

  • 4.1 Introduction
  • 4.2 Presentation and Analysis of Data
  • 4.3 Testing of Hypotheses
  • 4.4 Discussion of Findings

Chapter Five:

Summary, Conclusion and Recommendations

  • 5.1 Introduction
  • 5.2 Summary
  • 5.3 Conclusion
  • 5.4 Recommendations
  • References

Chapter One


Introduction

1.1 Background to the Study

Petty cash imprest system is an accounting system which provides for the replenishing of money spent for petty expenses in the organization. The imprest system provides that a specified amount of money be provided to meet petty expenses in the office at a specified period of time referred to as the float. The expenses so incurred are recorded in the petty cash record. At the end of the specified period an amount is issue to cover the expenses so incurred to bring the balance back to the original amount. The replenishment is credited to the primary cash account, usually a bank account (Dr – Petty Cash a/c, Cr – Bank a/c) and the debits will go to the respective expense accounts, based on the petty cash receipt dockets (Dr – Expense a/c, Cr – Petty Cash a/c). The amounted requested for the replenishment of the imprest is documented in the petty cash dockets and their associated receipts or invoices. The documentation facilitates the records of the expenses to be checked against the float to know what is left as balance; WEB EXPENSE (2016). The research therefore seek to investigate the effect of Imprest system on cash management.


1.2 Statement of the Problem

Petty cash imprest system is an accounting system which provides for the replenishing of money spent for petty expenses in the organisation. The imprest system provides that a specified amount of money be provided to meet petty expenses in the office at a specified period of time referred to as the float. The expenses so incurred are recorded in the petty cash record. At the end of the specified period an amount is issue to cover the expenses so incurred to bring the balance back to the original amount. The replenishment is credited to the primary cash account, usually a bank account (Dr – Petty Cash a/c, Cr – Bank a/c) and the debits will go to the respective expense accounts, based on the petty cash receipt dockets (Dr – Expense a/c, Cr – Petty Cash a/c). The amounted requested for the replenishment of the imprest is documented in the petty cash dockets and their associated receipts or invoices. The documentation facilitates the records of the expenses to be checked against the float to know what is left as balance.

The imprest system of cash management has not being given greater consideration in the accounting process of cash management in many organizations due to the nature of the purpose for which the cash is provided for. Just as the name implies proper check and balances are not conducted before the expenses are replenished to continue with the next imprest period. Therefore, many organization suffer hugh losses from the imprest system for sources considered insignificant in the accounting process of the organization.

Much of petty cash funds have being diverted for personal uses and unaccounted for thereby increasing organizational cost. The principal reason is that in may organization petty cash accounting is not included in the main accounting policy framework of the organization as a result when other accounting records are checked and scrutinized the petty cash records are not included in the scheme. Consequently, the neglect of management in overseeing the imprest system has constituted a major reason for the regular mismanagement and fraud in the imprest system of cash management. However with modern technology advocate for the application of the digital process to enhance a policy based implementation of the imprest system has been made. Therefore, the problem confronting the research is to determine the effect of the imprest system on cash management.


1.3 Objectives of the Study

  1. To find out the effect of imprest system on cash management.
  2. To determine how effective the imprest system is.
  3. To find out the challenges of the imprest system.

1.4 Research Questions

  1. What is the effect of imprest system on cash management?
  2. How effective is the imprest system?
  3. What are the challenges of the imprest system?

1.4 Significance of the Study

The study proffers the need for an enlarge accounting policy framework which will cover the presentation of accurate accounting records and cash management for the imprest system. The imprest system of cash management has not being given greater consideration in the accounting process of cash management in many organizations due to the nature of the purpose for which the cash is provided for. Just as the name implies proper check and balances are not conducted before the expenses are replenished to continue with the next imprest period. Therefore many organization suffer hugh losses from the imprest system


1.5 Research Hypothesis

  • Ho: The effect of imprest system on cash management is not effective
  • Hi: The effect of imprest system on cash management is effective

1.6 Scope of the Study

The study focuses on the appraisal of The effect of imprest system on cash management


1.7 Limitations of the Study

The study was confronted by some constraints including logistic and geographical factor.


1.8 Definition of Terms

Imprest System Defined

Petty cash imprest system is an accounting system which provides for the replenishing of money spent for petty expenses in the organisation. The imprest system provides that a specified amount of money be provided to meet petty expenses in the office at a specified period of time referred to as the float. The expenses so incurred are recorded in the petty cash record. At the end of the specified period an amount is issue to cover the expenses so incurred to bring the balance back to the original amount. The replenishment is credited to the primary cash account, usually a bank account (Dr – Petty Cash a/c, Cr – Bank a/c) and the debits will go to the respective expense accounts.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Introduction

This chapter presents the summary, conclusion and recommendations for further studies.


5.2 Summary

This study was carried out to examine the effects of imprest system on cash management using selected small business firms in Calabar. To achieve this objective, three research questions and one research hypothesis were formulated to guide this study. A structured questionnaire was use as the main instrument to gather data from 30 respondents in the selected small business firms in Calabar. Out of this number, 30(100%) copies of questionnaire were appropriately completed and returned for data analysis.

The data collected from the respondents were analyzed using simple percentage and tables to analyze the research questions while Chi-square statistical tool was employ to the research hypotheses. The findings revealed that; the effect of imprest system on cash management is effective.


5.3 Conclusion

Based on the findings of this study, it is concluded that petty cash imprest system provides a very efficient and convenient deterrent tool on any petty cash theft as surprise petty cash count can be conducted based on the concept that all actual petty cash vouchers(N) + remaining cash(N) should able to tally back to the petty cash float (N).

Furthermore, many businesses normally keeps a small amount of money to meet some small cash disbursements like payment of postage, medical claims, staff traveling claims. As the disbursements are for petty item hence the name petty cash


5.4 Recommendations

Based on the findings of this study, the researcher made the following recommendations:

  1. The petty cash float should be reviewed to ensure there should not be too frequent disbursement of petty cash which means that the initial establishment of the float is too low. It’s good to review the past three to six months petty cash disbursement before establishing the petty cash float.
  2. Sometimes, it is not the fault of the float but the definition of the term petty cash which should strictly be used for petty item that perhaps should be less than N50.00 (say)
  3. From a practical commercial standpoint, it is observed that only petty items should be disbursed vide the petty cash. However, don’t forget about some very urgent necessities which also needs to be paid by petty cash say for example, the urgent need to photocopy or plan printing many urgent sets of tender documents, etc which might suddenly deplete the petty cash float. However, at all times, the petty cash should be designed with the main objective of disbursement of very petty items and wherever possible any amount above certain threshold should be by cheques.
  4. Finally, imprest Cash Float system are particularly shown to be useful when a company has to operationally control many branches or overseas subsidiaries who need cash to run properly. If properly implemented, it deters cash frauds.

The Effect Of Imprest System On Cash Management


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