Financial AccountingThe Cash Imprest Account

The cash Imprest Account

imprest account
Photo by Tima Miroshnichenko

The cash imprest Account is a control mechanism to keep track of cash provided to incur day-to-day expenses. The cash amount issued for such a purpose is usually pre-determined and authorized by the management. This preset amount is called the “Petty Cash Float”. 

The petty cash accountant then records each transaction carried out and cash is issued. After the specific period or if the cash amount goes below the specific level/ float, the petty cash accountant submits all the vouchers/ bills to the chief cashier against which cash has been issued. The chief cashier then reimburses the difference between the current cash balance and the preset amount to petty cash after verification of submitted bills/ vouchers. For this reimbursement, there is no need to obtain further approvals from the management.

For example, if the petty cash float (imprest) is fixed at the level of $100. After the period of one month, the $70 has been spent whereas $30 is the current petty cash balance. The Petty cash accountant will show the evidence of $70 spent to the cashier, and the cashier after the verification will issue $70, thus making up for the cash balance back to petty cash float level i.e. $100.

Advantages of Cash Imprest Account

  • A predetermined float cash amount is issued to the Petty cash accountant. This will limit the exposure of cash to petty cash accountants, which in turn will reduce the risk of fraud.
  • The petty cash float/imprest is set out after considering the future need for cash, this makes it easy to make allowance/ budget for future cash requirements.
  • Issuing the petty cash amount for petty expenses to the departments/ locations results in time-saving for the main cashier.
  • In the main cash book, only petty cash float, and subsequently reimbursed amounts are recorded whereas all individual expenses are recorded in petty cash resulting in avoiding unnecessarily populating the main cash book.
  • At the time of reimbursing the petty cash float, vouchers/ bills are inspected by the cashier which ultimately develops a sense of accountability.

Posting from Petty cash to main cash book

While recording the cash transfer for petty cash, the total of cash issued is credited in the cash book, whereas the total of each expense head is debited in the relevant expense ledger. Further, the narration of “To petty cash account” is also written.

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