Petty cash and the imprest system Cambridge IGCSE Accounting (9–1) revision
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In plain words
Stamps, taxi fares, milk for the office: small payments in cash would clutter the main cash book. They are kept in a petty cash book of their own, usually looked after by a junior member of staff.
The imprest system keeps control of it. The petty cashier starts each period with a fixed sum, and at the end is given back exactly what was spent.
6 things to know
- The petty cash book records small payments in cash. It keeps small items out of the main cash book, and lets the job be given to a junior member of staff.
- Each payment needs a petty cash voucher as evidence. Analysis columns sort the payments by type, and the total of each column is debited to its expense account.
- Under the imprest system the petty cashier begins each period with a fixed amount, the imprest or float.
- At the end of the period, the amount that has been spent is paid to the petty cashier from the main cash book. This restores the imprest.
- At any moment, the cash in the box plus the vouchers should equal the imprest. That makes checking easy, and it limits how much could be lost or stolen.
- Keeping cash on the premises means small payments can be made at once and change can be given. But it can be stolen, it earns no interest, and it has to be kept secure.
Worked example
The imprest is $200. During the month the petty cashier pays out $163. State the balance of petty cash at the end of the month, and the amount needed to restore the imprest.
- Balance left = 200 − 163 = $37.
- The amount needed to bring it back up to $200 is the amount spent: $163.
Tips and tricks
- The amount received to restore the imprest always equals the amount spent in the period.
- "Restoring the imprest" means topping the petty cash up to its fixed amount. It does not mean starting again with a new amount.
It lands in your notebook with its questions as flashcards.
Petty cash and the imprest system: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
What is the petty cash book used for?
It keeps small items out of the main cash book.
The imprest is $150 and $118 has been spent. How much is needed to restore the imprest?
The amount spent is put back.
The imprest is $100. The petty cash box holds $34. What should the vouchers total?
Cash plus vouchers equals the imprest.
What is the evidence for a payment from petty cash?
Every payment needs one.
Which is a limitation of keeping cash on the business premises?
It also earns no interest.
Quiz
5 questions
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Worksheet
2 questions, 4 marks. Write your answers on paper, then check them.
Petty cash and the imprest system
Cambridge IGCSE Accounting (9–1) 0985 · 4 marks · papermunch.org
Name ______________________________ Date ______________
Explain how the imprest system of petty cash works.[2]
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The petty cashier starts each period with a fixed amount. At the end of the period the amount spent is reimbursed, restoring the petty cash to that fixed amount.
State two advantages of using the imprest system.[2]
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The amount spent in each period is known exactly. The cash and vouchers can be checked against the imprest at any time. (Also: the amount that could be stolen is limited.)
Answers: Petty cash and the imprest system
- 1. The petty cashier starts each period with a fixed amount. At the end of the period the amount spent is reimbursed, restoring the petty cash to that fixed amount.
- 2. The amount spent in each period is known exactly. The cash and vouchers can be checked against the imprest at any time. (Also: the amount that could be stolen is limited.)