Under ordinarysystem, the petty cashier is given a certain amount of cash for meeting petty expenses. When the petty cashier spends nearly the whole amount, he submits the account of expenses along with the surplus amount. If necessary, the petty cashier will be given another sum for petty payments for next periods.

Imprest system of petty cash fund is a more popular system of the petty cash fund. Under this system, the petty cashier is given a certain amount of cash usually at the beginning of the accounting year. At the end of each month, the petty cashier submits the accounts of expenses keeping surplus amount himself. At the beginning of the next month, the main cashier gives the petty cashier another sum which is equal to the amount spent by him during the previous month as reimbursement of the fund. Thus, the petty cashier begins the next period with the same amount of fund, which is known as float. The system in which the petty cash fund is reimbursed for the petty expenses incurred is called imprest system of the petty cash fund.

Imprest system of petty cash fund is better than the ordinary system because:

• It helps in timely reporting and checking. Thus, the errors, if any, can be rectified by the main cashier soon.
• It does not allow the petty cashier to keep idle cash with him as the float can be reduced if found more than necessary.
• It helps ultimately for effective control of the mis-utilization of the petty cash fund.

The office establishes the petty cash fund for paying petty expenses incurred daily. The following factors should be considered carefully by the petty cashier for proper operation of the fund: -

1. Payment should be made only for petty expenses.
2. Advance payments should not be made.
3. Cash payment voucher must be used for every petty payment.
4. The fund should not be mixed with any other amount received from any source.
5. Record of petty transactions should be maintained on petty cash account AGF No. 22.
6. Request for reimbursement of cash payment from AGF No. 6 (A) must be used for requesting reimbursement of expenditures.
7. Until reimbursement is made, the expenditures made through petty cash fund should not be posted in the bank cash book.

The following factors should be considered carefully by the petty cashier for proper operation of the fund: -

1. Payment should be made only for petty expenses.
2. Advance payments should not be made.

The following types of forms are used for operating the petty cash fund: -

1. Cash payment voucher (AGF No. 6)
2. Cash payment slip and cash control form (AGF No. 7)
3. Petty cash book/ Petty cash fund account (AGF No. 22)
4. Request for the reimbursement of cash payment form (AGF No. 6(A))