What is an imprest system?
The imprest system is an accounting system for paying out.There is a small reserve of cash at a business location.The imprest system is designed to provide a manual method for tracking cash balances.The imprest system has some essential features.
There is a separate account in the general ledger for the petty cash fund, which has a fixed amount of cash allocated to it.
The basis for replenishments of the petty cash fund are the receipts from the disbursements.
When new cash replenishments are made to the company checking account, expenses are recognized.A credit to the cash account is given when cash is paid from the checking account.
Unless the amount of cash assigned to the petty cash fund is deliberately altered, there is no reason why there should ever be another entry into the account used to document the cash balance.
The need to document all expenditures is the main feature of this system.It's an excellent way to keep a high level of control over cash disbursements.
The imprest system is no longer popular because many businesses prefer to use company credit cards for purchases and employees pay cash for reimbursement through the corporate expense reimbursement system.The imprest system can cause a business to lose cash because the cash custodian doesn't do a good job of recording disbursements.