Imprest system
Encyclopedia
The Imprest system is a form of financial accounting
system. The most common imprest system is the petty cash
system. The base characteristic of an imprest system is that a fixed amount is reserved, which will be replenished at the end of a period or when circumstances require. This replenishment is not credited on the imprest account, but from another source. When a sufficient amount is used, the imprest account will never be credited again. As such, it can be seen as a permanent debt.
In a non imprest system where a fixed amount is issued every month e.g. $100 every time cash is required, there is no incentive to ensure all money issued has been documented because when money is all spent a check for a fixed amount is issued. It is much more difficult to reconcile a non imprest system as you never know how much exactly should be in the float.
In an imprest system the amount requested is documented, the documentation being the petty cash dockets and their associated receipts or invoices. So at all times you can check how much should be left in the petty cash float by deducting the amount spent from the opening petty cash float.
system, petty cash receipts are written for each amount issued. So, when all of these receipts are totalled at the end of the month and deducted from the opening petty cash float, the calculated value must agree with what is left in the petty cash float. Under the imprest system, only that which is recorded as spent is replenished. Any shortfalls may have to be replenished by the guardian, usually a bookkeeper, of the petty cash float from their own personal resources.
Accountancy
Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in...
system. The most common imprest system is the petty cash
Petty cash
Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing and then cashing the cheque...
system. The base characteristic of an imprest system is that a fixed amount is reserved, which will be replenished at the end of a period or when circumstances require. This replenishment is not credited on the imprest account, but from another source. When a sufficient amount is used, the imprest account will never be credited again. As such, it can be seen as a permanent debt.
Petty cash imprest system
Petty cash imprest system allows only to replenish the spending. So, if you start the month with $100 in your petty cash float and spend $90 of that cash in the month, an amount of $90 will be then placed in your petty cash float to bring the balance of your petty cash float back to $100. The replenishment is credited to the primary cash account and the debits will go to the respective expense accounts, based on the petty cash receipts.Why use the imprest system
In this example the maximum amount of petty cash that can be issued (spent) is $100. You can only spend what you have and you are only replenished with what you spend, in this case $90In a non imprest system where a fixed amount is issued every month e.g. $100 every time cash is required, there is no incentive to ensure all money issued has been documented because when money is all spent a check for a fixed amount is issued. It is much more difficult to reconcile a non imprest system as you never know how much exactly should be in the float.
In an imprest system the amount requested is documented, the documentation being the petty cash dockets and their associated receipts or invoices. So at all times you can check how much should be left in the petty cash float by deducting the amount spent from the opening petty cash float.
How petty cash imprest system works
The imprest system ensures that you must document how the petty cash is spent. In a petty cashPetty cash
Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing and then cashing the cheque...
system, petty cash receipts are written for each amount issued. So, when all of these receipts are totalled at the end of the month and deducted from the opening petty cash float, the calculated value must agree with what is left in the petty cash float. Under the imprest system, only that which is recorded as spent is replenished. Any shortfalls may have to be replenished by the guardian, usually a bookkeeper, of the petty cash float from their own personal resources.
External links
- Imprest website dedicated to the term Imprest.