Summary: How the imprest petty-cash system works — process, postings, controls, and policy.
Definition
Petty cash is a small amount of money a company uses for small, urgent expenses without writing a cheque or following procurement. The float varies by organisation. One person — usually a junior accountant — is designated petty cash custodian, disbursing small amounts subject to approval and documenting each payment with a voucher and receipt.
How the imprest system works
- Staff needing cash fill in a petty cash voucher, approved by their line manager or a senior accountant.
- The cashier disburses the cash against the approved voucher and files it.
- Staff spend the cash, obtain a valid receipt, then return any balance plus the receipt to the cashier.
- The cashier updates the voucher with correct figures and files vouchers and receipts.
- When the float reaches the reimbursement point (usually a percentage of the total float), the cashier prepares a reimbursement request — a summary of all spending with all vouchers and receipts attached.
- A senior accountant approves it and a cheque is drawn; the cycle repeats.
Posting and control
The reimbursement cheque is drawn on the bank account, so the Cash account (not Petty Cash) is credited and expense accounts debited — the Petty Cash ledger account is not involved in replenishment. At all times the custodian should hold currency, coins, and receipts totalling the imprest balance. Control happens at replenishment: the approver reviews the receipts attached to the cheque request, and an independent person can confirm cash plus receipts equals the imprest amount. For guidance on cash handling and internal controls, see the Central Bank of Kenya.
Policy points
- Never use petty cash for personal expenses or items that must follow procurement;
- Keep the float standard and review it regularly;
- A company may hold an M-Pesa float on a mobile line;
- Any transaction without a receipt needs a signed undertaking;
- Set clear per-transaction limits;
- Always secure petty cash in a safe and insure it.
Related resources: Accounting & Bookkeeping Services · Free Excel Templates
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