1.1 Introduction
Cash management is a key management tool seeks to establish the financial position of an organization. Cash management is keen on management of cash flow and this aims to achieve the control of cash balances by paying financial commitments ultimately resulting in meeting organizational needs. Services of Cash management vary from basic checkbook balancing to making investments in bonds and other financial securities and software which are automated which enables collection of cash in a more easy fashion. Cash control entails a wide array of functions and roles which enable both individual persons and businesses organizations to process their receipts and payments transactions in a more controlled, organized and efficient way. Today, the administering of cash assets regularly uses many support services that are automated and availed by financial institutions (Malcolm & Harris, 2010).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.
1.2 Background of 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).
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Effect of Imprest System on Cash Management in an Organization.
1.3 Statement of Problems
Investigation revealed that 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 huge 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.
1.4 Aim and Objectives of Study
The aim of the study is to investigate the Effect of Imprest System on Cash Management in an Organization. In achieving this aim, the following specific objectives were laid out as follows:
- To determine how effective the imprest system is;
- To investigate the challenges of the imprest system; and
- To find out The Effect of Imprest System on Cash Management.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- What are the challenges of the imprest system?
- How effective is the imprest system?
- What is the effect of imprest system on cash management?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: The effect of imprest system on cash management is not effective
- H1: The effect of imprest system on cash management is effective
1.7 Significance of 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.
This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.8 Scope of Study
The scope of the research is focused on the Effect of Imprest System on Cash Management in an Organization.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 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.
Imprest Payment Procedures: This is the composite response score of each respondent’s extent of agreement that the procedures for releasing imprest to academic departments are cumbersome.
