Final answer:
The imprest cash account is an account with a fixed balance used for small or miscellaneous business expenses. It's used to simplify accounting for minor transactions and to maintain better control over cash usage.
Step-by-step explanation:
An imprest cash account is typically used by organizations to manage petty cash or small miscellaneous expenses that occur in the course of business operations. The correct answer to the student's question is C. One that contains a stipulated amount of money and is used for limited purposes. This type of account has a fixed balance, and when funds are disbursed and it's time to replenish the account, only the amount spent is added back to return the balance to its original level.
Imagine a scenario where a company's employees regularly incur minor expenses like postage, office supplies, or small travel costs. Instead of using the main company accounts, they would use the imprest cash account to cover these costs, with funds being restored typically after a set period or when the account reaches a certain threshold. This system simplifies accounting for these small transactions and ensures a company doesn't have large amounts of cash lying around, which can be a security risk.