IMPREST SYSTEM Meaning and
Definition
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The imprest system refers to a method of petty cash management that involves maintaining a fixed amount of money in a designated fund to cover small and miscellaneous expenses. Under this system, a specific sum is initially established as the imprest fund, which is held by a responsible individual or petty cash custodian within an organization. The imprest fund is usually a small amount of cash, such as $100 or $200.
When an employee needs to make a small cash purchase or pay for a minor expense, they make a request to the petty cash custodian. The custodian then provides them with the required amount from the imprest fund, and the employee is responsible for providing a receipt or other documentation as proof of the expense.
After each withdrawal, the petty cash custodian keeps a record of the transaction and subtracts the amount provided from the imprest fund. Periodically, typically at the end of a specific time period like a week or month, the custodian reconciles the fund by comparing the remaining amount in the imprest fund with the total of all the receipts. The custodian then replenishes the fund back to its original amount, reimbursing it with the necessary funds.
The imprest system is efficient and reduces the need for frequent reimbursements and detailed expense tracking. It enables organizations to manage petty cash expenditures effectively while maintaining transparency and accountability throughout the process.
Etymology of IMPREST SYSTEM
The word "imprest" has its origin in the Latin word "imprestare", which means "to lend" or "to advance". It entered the English language in the late 16th century, originally referring to a sum of money advanced to someone. The term "imprest system" specifically developed in the 18th century, relating to a financial system used in military or governmental organizations. In this context, it refers to a system where funds are advanced to a person for specific expenses, and then replenished upon submission of the appropriate documentation or justification for the expense.
