explain and apply the imprest system of petty cash
2.3 Books of Prime Entry – The Imprest System of Petty Cash 💰
What is an Imprest System?
The imprest system is a simple way to manage small cash expenses (petty cash). Think of it like a “money jar” that always stays at the same amount. Whenever you spend money, you record the expense and then replenish the jar back to its original level. This keeps the total cash on hand constant and makes it easy to track where the money goes. 📦
How It Works – Step by Step 📝
- Choose an Imprest Amount – Decide how much cash you want in the petty cash box (e.g., £200). This is the fixed amount.
- Record the Initial Cash – Write a journal entry: Debit Petty Cash £200, Credit Cash £200.
- Spend the Cash – For each small purchase, record the expense in the petty cash book (date, description, amount).
- Replenish the Box – When the cash falls below the imprest amount, submit receipts and write a replenishment entry: Debit the expense accounts, Credit Petty Cash.
- Close the Book – At the end of the period, the petty cash balance should equal the imprest amount. If it doesn’t, investigate the difference.
Example: Setting Up a £200 Petty Cash Fund
| Date | Description | Amount (£) | Balance (£) |
|---|---|---|---|
| 01/05 | Initial cash set up | 200.00 | 200.00 |
| 05/05 | Stationery (receipt £15) | -15.00 | 185.00 |
| 10/05 | Coffee for team (receipt £8) | -8.00 | 177.00 |
| 15/05 | Replenishment (total receipts £23) | +23.00 | 200.00 |
Exam Tips for the IGCSE Accounting Paper
- Show the fixed imprest amount clearly in your answer.
- Use the correct journal entry format (Debit/ Credit).
- Include receipts or a summary of receipts when explaining replenishment.
- Remember to reconcile the petty cash balance to the imprest amount at the end.
- Use clear headings and bullet points – examiners appreciate tidy, easy‑to‑read answers. ??
Revision
Log in to practice.
0 views
0 suggestions