1. Imprest System (Most Common)
✅ How It Works:
- A fixed amount of cash is allocated (e.g., $500).
- When cash is spent, receipts are collected.
- At a set period, the fund is replenished to maintain the original balance.
✅ Advantages:
- Easy to control and track expenses.
- Reduces the risk of fraud and misuse.
- Simplifies accounting by ensuring all expenditures are recorded.
✅ Best For:
- Organizations needing strict control over petty cash expenses.
2. Open System (Ordinary System)
✅ How It Works:
- Money is issued as needed without maintaining a fixed balance.
- No formal replenishment process; cash is topped up as required.
- Transactions are recorded only when funds are low.
✅ Disadvantages:
- Higher risk of misuse and fraud.
- Difficult to track and control expenses.
✅ Best For:
- Small businesses with minimal petty cash transactions.
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