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The more scientific method of maintaining petty cash introduced into practice is the imprest system. Under this system, a fixed sum of money is given to the petty cashier to cover the petty expenses for the period. At the end of a period the petty cashier submits his statement of petty expenses to the chief cashier. The chief cashier on the receipt of such statement refunds to the petty cashier the exact amount spent by him during the period, thus making the imprest for the next period the same as it was at the beginning of the current period.
It is to be noted that the amount of cash in the hand of the petty cashier is a part of the cash balance; therefore it should be included in the cash balance when the latter is shown in the trial balance and the balance sheet. It should also be kept in mind that petty cash book is a branch of the cash book.
Advantages of the Imprest System
-The petty cashier cannot draw as and when he likes, it prevents the unnecessary accumulation of cash in his hand thus the chances of defalcation of cash are minimized.
-The petty cashier has to account for his expenses before he can draw further sums, therefore the petty cash book remains up to date.
-The petty cashier has to produce to the chief cashier the petty cash book for inspection. This acts as a healthy check on the petty cashier.
