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 after a certain period of time or when circumstances require, because money was spent, it will be replenished. This replenishment will come from another account source, e.g., petty cash will be replenished by cashing a cheque drawn on a bank account.
Video Imprest system
Petty cash imprest system
Petty cash imprest system allows only the replenishment of the spend made. So, if one starts the month with EUR100 in one's petty cash float and spend EUR90 of that cash in the month, an amount of EUR90 will be then placed in one's petty cash float to bring the balance of your petty cash float back to EUR100. 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)...
Maps Imprest system
Advantages
In this example the maximum amount of petty cash that can be issued (spent) is EUR100. The claimant can only spend what they have and is only replenished with what they spend, in this case EUR90.
In a non imprest system where a fixed amount is issued every month, e.g., EUR100 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 one never knows 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. Therefore, at all times one 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 one must document how the petty cash is spent. In a petty cash 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 might need to be replenished by the guardian, usually a bookkeeper, of the petty cash float from their own personal resources.
Source of the article : Wikipedia
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