Explain how the imprest system of petty cash book works

Question

Explain how the imprest system of petty cash book works

Answer 1

Companies maintain a petty cash fund to pay for small, miscellaneous expenditures such as stamps, small delivery charges, or emergency supplies. The size of a petty cash fund varies depending on the needs of the business. A petty cash fund should be small enough so that it does not unnecessarily tie up company assets or become a target for theft, but it should be large enough to lessen the inconvenience associated with frequently replenishing the fund. For this reason, companies typically establish a petty cash fund that needs to be replenished every two to four weeks.

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