Methods of Petty Cash Management

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1. Imprest System (Most Common)

✅ How It Works:

• A fixed amount of cash is allocated (e.g., $500).
• When cash is spent, receipts are collected.
• At a set period, the fund is replenished to maintain the original balance.

✅ Advantages:

• Easy to control and track expenses.
• Reduces the risk of fraud and misuse.
• Simplifies accounting by ensuring all expenditures are recorded.

✅ Best For:

• Organizations needing strict control over petty cash expenses.

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2. Open System (Ordinary System)

✅ How It Works:

• Money is issued as needed without maintaining a fixed balance.
• No formal replenishment process; cash is topped up as required.
• Transactions are recorded only when funds are low.

✅ Disadvantages:

• Higher risk of misuse and fraud.
• Difficult to track and control expenses.

✅ Best For:

• Small businesses with minimal petty cash transactions.

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