Which of the following demonstrates the imprest system?
Answer Details
The option that demonstrates the imprest system is "Float → expenses paid → cash from bank → float".
The imprest system is a method of controlling cash payments that ensures that a fixed amount of money is always available for making small, regular payments, such as petty cash expenses. In this system, a fixed amount of money (known as the float) is initially withdrawn from the bank and placed in a petty cash box. This float is used to pay for small expenses as and when they arise, and receipts are collected to account for the money spent.
When the float runs low, the petty cash custodian requests a top-up from the bank, and the exact amount of money spent is reimbursed. This reimbursement should bring the petty cash balance back up to the original float amount.
Option "Float → expenses paid → cash from bank → float" follows this pattern, where the float is initially taken out, expenses are paid from the float, and when the float runs low, the petty cash custodian requests a top-up from the bank. The money spent is then reimbursed, and the float is restored to its original amount. This is the process used in the imprest system.