Which of the following statements correctly describes an imprest system?
A) An imprest system is an internal control procedure relating to cash receipts.
B) There is no difference between a petty cash fund and an imprest bank account.
C) If the transfers from the payroll account to the employees' checking accounts occur without error, the imprest payroll bank account will equal zero after all employees have been paid.
D) The use of an imprest system eliminates the need for bank reconciliations.

Question

Quizplus · Accepted Answer

An imprest system refers to a system where a fixed amount of funds is set aside for a specific purpose, and expenditure from this fund is replenished to maintain the original amount. In the case of an imprest payroll bank account, a fixed amount is transferred from the regular payroll account to the imprest account, from which employee checks are issued. If this process occurs without error, the imprest payroll bank account will equal zero once all employees have been paid. Therefore, option C is the correct statement about the imprest system. Options A, B, and D are incorrect statements about the imprest system.

Which of the Following Statements Correctly Describes an Imprest System