Imprest

What is Imprest?

An imprest is referred to the cash account, on which, a business is depending for paying regular, small expenses. Funds that are available in imprest are replenished regularly to maintain a fixed balance.

This term of “imprest” can also signify the monetary advance that is given to an individual for a certain purpose.

Understanding Imprest

One of the most commonly known types of imprest is called the petty cash account. This one is used to cover small transactions when issuing cheques seems inconvenient or impractical. These petty cash accounts maintain a specific cash amount on-site, which can easily be used to pay for minor expenses or reimburse employees.

Typically, petty cash funds are regulated by custodians who maintain the account and disbursement of cash to employees, who in turn, provide receipts associated with the business. Along with that, imprests could also be used to cover bonuses, employee travel, dividends, and employee payroll.

Once these outgoing expenditures are paid, the fund is generally reimbursed by Capital from the primary account of the company. Also, one thing that should be kept in mind is that imprests discourage the use of unauthorized expenditure as the funds get earmarked for a certain purpose(s).

Subsequently, imprests generally pay the same money amount regularly, which will ideally bring the account to a nearby zero balance, before it gets replenished automatically with the same amount of money.

With this system in place, it is easier to keep an eye on the expenditure, detect fraud and flag out discrepancies.

How is Imprest Setup?

The system of imprest comprises the following steps:

• Establishment of the petty cash fund, with a specific cash amount; this gets recorded in the ledger of the company
• Every expense that is paid through the petty cash fund has to be documented along with receipts
• The fund gets regularly replenished with receipts’ disbursement to maintain a certain fixed balance
• The fund is closely monitored for discrepancies between expected and actual cash; upon discovery, discrepancies get investigated thoroughly

As companies and organizations depend upon electronic transactions, the imprest system gradually falls out of favour. Often, it is easier to use the credit card of the company in comparison to imprest as the cards provide electronic transactional documents and don’t trigger the need to replenish any expenses whatsoever.