What are the disadvantages of imprest system?

April 28, 2019 Off By idswater

What are the disadvantages of imprest system?

One of the major drawbacks of using an Imprest system is that it causes huge inconvenience for larger expenses. The system is highly compatible and convenient for smaller expenses while opposite for larger expenses.

What is an imprest system of petty cash?

The imprest system is an accounting system for paying out and subsequently replenishing petty cash. A fixed amount of cash is allocated to a petty cash fund, which is stated in a separate account in the general ledger. All cash distributions from the petty cash fund are documented with receipts.

How should a petty cash system be maintained?

It is important that the petty cash book and the money are kept in a safe and secure place. Ideally the money should be kept in a lockable cash box. The petty cashier should keep the key to the petty cash box in a safe place with a duplicate key being kept by the main cashier or accountant.

What is the major purpose of an imprest petty cash?

The most well-known type of imprest is a petty cash account, which is used to cover smaller transactions when it’s impractical or inconvenient to cut checks. Such accounts maintain a set amount of cash on-site, which can be used to reimburse employees and pay for small expenses.

What is an imprest amount?

The imprest amount is the fixed amount of cash that is presumed to be located in a petty cash box. For example, the initial funding of a petty cash box is $300, and this amount is recorded in the corresponding general ledger account for petty cash.

How is petty cash imprest calculated?

If the amount of petty cash is $100, 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 be debited or credited again.

Who should be in charge of petty cash?

Usually one individual, called the petty cash custodian or cashier, is responsible for the control of the petty cash fund and documenting the disbursements made from the fund. By assigning the responsibility for the fund to one individual, the company has internal control over the cash in the fund.

What is the purpose of imprest?

The Imprest system is an accounting system that’s used to track how your business is spending cash. In most cases, Imprest systems are used to account for petty cash (a small amount of money used for expenditure on smaller items, i.e. office supplies, catered lunch, cards for customers, etc.).

How do you balance imprest system?

What is imprest amount example?

What does the imprest system of petty cash mean?

An imprest system of petty cash means that the general ledger account Petty Cash will remain dormant at a constant amount. If the amount of petty cash is $100, then the Petty Cash account will always report a debit balance of $100. This $100 is the imprest balance.

How is cash allocated in the imprest system?

A fixed amount of cash is allocated to a petty cash fund, which is stated in a separate account in the general ledger. All cash distributions from the petty cash fund are documented with receipts.

What is the purpose of the imprest system?

The imprest system is an accounting system for paying out and subsequently replenishing petty cash. Petty cash is a small reserve of cash kept on-site at a business location for incidental cash needs. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used.

Is the petty cash book part of the double entry system?

The petty cash book is not part of the double entry bookkeeping system, and is used simply to record movements on the petty cash imprest fund.