Explanation :
Most companies set up a special fund called a petty cash fund for small purchases and office expenditures. The petty cash fund is exactly like it sounds. It is a petty amount of cash– maybe only $50 to $100. Companies use these funds to buy small items like office supplies and postage instead of going through the hassle of writing a check for every book of stamps. An imprest system is used to run and manage a petty cash fund.
In a nutshell :
- Imprest refers to a type of cash account maintained by a company used to pay for small incidental or routine expenses.
- A fixed account balance is established in the imprest account and refunded as needed when money is withdrawn for items like payroll, travel, or petty cash.
- Because of its small and fixed nature that is easily monitored, imprest discourages unauthorized or lavish expenses.
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