Question

Which of the following best explains the imprest system of petty cash?

A Each month an equal amount of cash is transferred into petty cash.
B The exact amount of petty cash expenditure is reimbursed at intervals to maintain a fixed float.
C Petty cash must be kept under lock and key.
D The petty cash total must never fall below the imprest amount.

Answer 1

The imprest system of petty cash is a method used to control and track small cash expenses in a business.

A fixed amount of money is initially placed in a petty cash fund, and then any expenditures made from the fund are reimbursed at regular intervals to maintain a fixed float.

The Correct option is ;

B The exact amount of petty cash expenditure is reimbursed at intervals to maintain a fixed float.

Step-by-step explanation:

The best explanation for the imprest system of petty cash is option B: The exact amount of petty cash expenditure is reimbursed at intervals to maintain a fixed float.

The imprest system of petty cash is a method used to control and track small cash expenses in a business. Under this system, a fixed amount of money is initially placed in a petty cash fund, and then any expenditures made from the fund are reimbursed with an equal amount of cash at regular intervals. This helps to ensure that the petty cash balance remains constant and accurate.

For example, if $100 is initially placed in the petty cash fund and $20 is spent for miscellaneous office supplies, $20 would be reimbursed from the main cash account to maintain the original $100 float in the petty cash fund.