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How does the imprest system of petty cash book work?

Updated April 17, 2017

The imprest system is a method of accounting that is used in business to help maintain concise records of petty cash flow, or claims for purchases of inexpensive items like envelopes or postage stamps. Petty cash is money that is reserved for small expenses where payment by cheque or debit card would prove inappropriate or time-consuming. Using the imprest system to calculate and top up petty cash reserves enables easy tracking of small expense claims and reduces the risk of fraud because when petty cash expenditure is added to the remaining cash in the cash box the total should always equal the original float.

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  1. Decide a maximum value for minor expenditure claims put forward through the petty cash system. Michael Fardon and Sheila Robinson, authors of "Level 1 Bookkeeping Skills," suggest £25 as a maximum value for small expense claims.

  2. Write into a notebook a list of minor expenses that your business regularly incurs and which are refundable from petty cash. Estimate how much petty cash is required for the reinbursement of these approved expenses during one month.

  3. Appoint a member of staff to adopt the role of petty cashier.

  4. Provide a sum of money from the main business account for the petty cashier to keep in a lockable cash box at the beginning of each calendar month. This money is called a "float." The float should provide enough money to cover the estimated monthly small expenditure costs with a small amount left over. For example, if the estimated monthly petty cash claims amount to £70, a float of £100 is an acceptable sum.

  5. Write each small expenditure claim onto a petty cash voucher and attach a purchase receipt to the voucher. The petty cash voucher details the amount claimed and the date of the transaction and is signed by the claimant and the petty cashier. The petty cashier reimburses the claimant using money from the petty cash box. The petty cashier should record the details of the transaction in the petty cash book and then store the petty cash book, petty cash box, vouchers and receipts in a lockable cabinet.

  6. Calculate the total amount of small expenditure costs that your business has incurred at the end of each calendar month and then top up the float with the same amount of money to restore the float to its original value. For example, if the original float amount is £100 and petty cash expenditure during the month totals £70.50, add £70.50 to the petty cash box at the end of the month.

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Things You'll Need

  • Notebook
  • Pen
  • Petty cash book
  • Cash box
  • Petty cash vouchers
  • Cabinet

About the Author

Mother of three and graduate of the London Metropolitan University, Julie Vickers is an early years teacher and writer who also loves to craft and create! She writes on topics such as education, health and parenting for websites such as School Explained and has contributed learning sessions on child development and behavior for the Education Information and Learning Services website.

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