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April 30, 2007

What is an imprest system of petty cash?

An imprest system of petty cash means that the general ledger account Petty Cash will remain dormant at a set amount. For example, if the petty cash custodian is entrusted with a locking bag containing $100 of currency and coins, then the Petty Cash account will always report a debit balance of $100. This $100 is the imprest balance. As long as $100 is adequate for the organization’s small disbursements, then the general ledger account Petty Cash will never have an entry again.

When the coins and currency in the locking bag get low, the petty cash custodian will request a check to replenish the coins and currency that were disbursed. Since the requested check is drawn on the organization’s checking account, the Cash account (not the Petty Cash account) will be credited. The debits will go to the expense accounts indicated by the petty cash receipts, e.g. postage expense, supplies expense. In other words, the general ledger account Petty Cash is not involved in the replenishment. (Replenishment means getting the total of the coins and currency in the locking bag back to $100.)

Under the imprest system, the petty cash custodian should at all times have a combination of coins, currency, and petty cash receipts equal to $100, the imprest amount.

Control occurs through the review of the petty cash receipts attached to each check request for replenishment. It also occurs by occasionally confirming that the items in the locking bag do indeed add up to the imprest amount.

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Comments

6 Responses to “What is an imprest system of petty cash?”

  1. John Knuth on March 2nd, 2009 4:29 pm

    Do you have a blank imprest account I could work up a sample of my own for my boss?

  2. jesse on April 25th, 2009 11:37 am

    your coaching is very educative, informative and down to earth in explanation and description. more grease to your elbow. thanks very much.

  3. Sunday A. Okpo on July 5th, 2009 2:17 pm

    Imprest system of petty cash is an arrangement whereby cash is reserved to take care of expenses or payments which are hitherto too small or trivial to be handled in the normal ledgers. A register is kept to record all payments made through the imprest. However, these payments have to be backed by authority from appropriate quarters.
    There is a provision of replenishment when the amount outstanding is exhausted.
    The main control element in imprest system is that during replenishment, the supervisor will confirm all payments made out of the imprest, check the approvals and reconcile it with the balance before approving replenishment.
    Imprest system is useful in organisations in that it will allow for early settlement of some obligations without having to wait for the normal processing which may take some time. It also reduces the burden of processing many small documents. Disruptions of work flow is avoided.

  4. Sangeeta on July 29th, 2009 9:25 am

    Hi,
    I maintain an Imprest account for 1000.00 dollars.

    On july 24th the account bal on my excel sheet shows 300.00 I requested a reimbursement for 700.00. The reimbursement was processed and the account balance was then 1000.00
    however, i inadvertently processed the same 700.00 cheques with some additional cheques i.e. total of 965.00 for reimbursement. The account was over by 700.00 dollars. i am trying to correct this entry but does not match with my excel sheet.
    can you help me please?
    thanks
    Sangeeta

  5. elf on August 10th, 2009 10:21 pm

    hi, we are using SAP accounting. we are also using imprest system on our pcf. cash-in for the account of the company is directly deposited to our bank account & not included in our pcf, which i believe is correct. what method is that where all petty cash-in & out are included in one pcf fund? is that the fluctuating system? is it advisable that we record disbursements upon issuance in our SAP system to maintain real time balance sheet? would that make sense? hope u could help. thanks!

  6. Sekitooleko on October 15th, 2009 3:51 am

    i) What benefits would accrue from an imprest form of payment?
    ii) What control measures would you recommend for an imprest system to operate properly and effectively?

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