Final answer:
An imprest system refers to a method of managing a petty cash fund where the balance varies from month to month based on the cash needs of a business. This system involves replenishing the fund to a fixed amount after it has been used.
Step-by-step explanation:
An imprest system refers to a method of managing a petty cash fund where the balance varies from month to month based on the cash needs of a business. This system involves replenishing the fund to a fixed amount after it has been used. The idea is to maintain a constant amount in the petty cash fund to meet small, miscellaneous expenses without the need for frequent bank withdrawals.
For example, let's say a business has an imprest system with a fixed amount of $100. If $50 is used from the petty cash fund to buy office supplies, the fund balance will decrease to $50. To maintain the fixed amount, another $50 will be added to the fund, bringing the balance back to $100.
Therefore, the statement that an imprest system means the petty cash fund's balance should vary from month-to-month depending on the cash needs of a business is False.