Question

Explain the meaning of the imprest system of petty cash book.

Answer 1

1. Under this system, a fixed amount necessary or sufficient to meet petty payments determined on the basis of past experience is paid to the petty cashier on the first day of the period. (It may be a week or fortnight or month).
2. The amount given to the petty cashier in advance is known as “Imprest Money”.
3. The word imprest means payment in advance.
4. The petty cashier makes payments from this amount and records them in the petty cash book.
5. At the end of a particular period, the petty cashier submits the petty cash book to the head cashier.
6. The head cashier scrutinies the petty payments and gives an amount equal to the amount spent by the petty cashier so that the total amount with the petty cashier is now equal to the amount he had received in the beginning as advance.
7. Under the system, the total cash with the petty cashier never exceeds the imprest at any time during the period.
8. This method thus provides effective control over petty payments.