# Imprest Accounts: Definition, Uses, Benefits, and Management

![Imprest](https://www.investopedia.com/thmb/IMRPbyA_d4VN2x3ICrGY-WPH210=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TermDefinitions_imprest-1e21cfa33f6e4e74a1114ca3524a39b7.jpg)

*— Investopedia / Tara Anand*

## What Is Imprest?

An imprest is a cash account used by businesses to handle small, routine expenses efficiently. The account maintains a fixed balance, regularly replenished to preserve its function.

Known for its structure, the imprest system involves steps such as setting a petty cash fund, documenting expenses, and tracking discrepancies to deter unauthorized spending. This method remains particularly useful for handling petty cash, payroll, and minor reimbursements, ensuring financial oversight and fraud prevention.

### Key Takeaways

*   An imprest is a cash account used by businesses to manage small, routine expenses, which is regularly replenished to maintain a fixed balance.  
    
*   The imprest system helps control unauthorized spending by earmarking funds for specific purposes and making it easier to track and flag discrepancies.  
    
*   While traditionally managed through physical petty cash, the trend is shifting towards electronic transactions for better documentation and ease of use.  
    
*   The term "imprest" also refers to a monetary advance given to a person or entity for a specific purpose, typically in anticipation of necessary expenditures.

## Understanding the Imprest System

The best-known type of imprest is [petty cash](https://www.investopedia.com/terms/p/pettycash.asp), used for small transactions when writing checks is impractical. Such accounts maintain a set amount of cash on-site, which can be used to reimburse employees and pay for small expenses. Custodians manage petty cash funds, dispensing cash to employees who provide business-related receipts.

Imprests can also cover payroll, [dividends](https://www.investopedia.com/terms/d/dividend.asp), employee travel, and [bonuses](https://www.investopedia.com/terms/b/bonus.asp). Once these expenses are covered, the fund is usually replenished from the company's main bank account.

Imprests discourage unauthorized spending as the funds are allocated for specific uses. Imprests usually dispense a regular amount, often bringing the balance to near zero before it's automatically refilled. This system helps monitor expenses, catch discrepancies, and detect fraud.

##  Key Steps in Managing an Imprest Account

The imprest system involves the following steps:

*   A petty cash fund is established, with a set amount of cash. This is recorded in the company's ledger.
*   Any expenses paid through the petty cash fund must be documented with receipts.
*   The fund is replenished regularly with disbursement receipts to maintain a fixed balance.
*   The fund is carefully monitored for differences between expected and actual cash, and discrepancies are investigated.

## The Evolving Role of Imprest Accounts

As companies increasingly rely on electronic transactions, the imprest system is steadily falling out of favor. It's often easier to use a company credit card than an imprest, because the former offers electronic documentation of transactions, and doesn't trigger a need to replenish any outgoing funds. 

## What Is an Imprest Account Used for?

Companies keep cash on hand in imprest to pay for incidentals like office supplies, small reimbursements, or other minor expenses. Similar to petty cash, imprest should not be used for material expenses such as utilities or to purchase assets for the firm.

## Where Does the Word "Imprest" Come From?

The word is derived from the early Italian or medieval Latin _imprestare,_ which meant to lend. Thus, an imprest now means a small advance of funds used for incidentals, and which must be replenished after use.

## How Else Is the Term Imprest Used?

In addition to funds used by a business, an imprest may also refer to money paid to someone for doing work on behalf of a government. In this case, the government advances the funds prior to the work being completed.

## The Bottom Line

The imprest system is an effective way for businesses to manage small, routine expenses like petty cash, payroll, and travel. By maintaining a fixed balance and regularly replenishing it, companies can easily monitor and control such expenses.

This method also minimizes unauthorized spending, as funds are earmarked for specific purposes, reducing the chance of fraud. However, with the rise of electronic transactions, businesses are increasingly favoring digital alternatives for convenience and automatic documentation. Understanding how imprest works can help organizations effectively manage their minor financial transactions while adapting to modern payment methods.