In order to define imprest, it is important to understand what to use an imprest system for. First, an imprest account is responsible for overseeing funds in the form of “petty cash.” Petty cash is a small amount of cash on hand. Second, an imprest account (synonymous with imprest system) is a way to control expenses. You have to create a fixed account that has documentation with the sole purpose to replenish that account to the fixed level. Do not utilize this fund for any important financial matters such as Accounts Payable or paying off Outstanding Debt. This imprest account is created for the sole reason of taking care of the less crucial aspects of the organization.
Imprest System Example
You can see Imprest System Examples in the business world every day. For the most part, every time a person drinks a cup of coffee at their office of business, it is likely that the funds for that coffee came from an imprest account. If a company decides that it is going to have an executive board meeting one day and provide a catered lunch for all of the members of the board, then it probably came from an imprest account. The imprest account exists for the sole purpose of removing the hassle from the purchases and spending on less important necessities of the business on a daily basis. Without the imprest account, it would take longer to purchase the obligatory necessities that are paramount for a business to run.
As far as Imprest Accounting goes, petty cash in an imprest account is not overly difficult to account for and keep track of. Keep the cash on hand and in the office. This creates an opportunity for convenient access to the cash for small necessities, such as printer paper or printer ink. While at the same time, it also makes it easy to replenish the fund as well.
Create he account format by simply debiting the petty cash fund while crediting cash to the company account. It really is that simple! The imprest fund cashier (the person who keeps track of the petty cash) is responsible for checking the imprest account periodically. They need to see if the account needs replenishment. There are no real restrictions on the imprest system. So this account creates a situation in which you can purchase inexpensive aspects to the business without any fuss.