Direct Payment or Direct Receipt – is when a payment is received or made directly via cash or cheque. The cash that’s received will ultimately be deposited into the bank account as the cheque that’s received.
It works the same way. The cash that’s been spent will often have to be taken from the bank account as the cheque that’s written out to pay someone. Therefore, a direct payment or direct receipt needs to be reconciled to the bank statement lines
Overpayment is when too much money has been paid for something or when someone has paid you too much for something. You create a receive money/spent money and then reconcile it to the portion of the bank statement line that represents that overpayment. That overpayment can then be applied to a future invoice to reduce it
Prepayment is when money has been paid upfront for something. There’s a separate post on this. You have to reconcile a prepayment to a bank statement line because if someone is depositing money for a prepayment, you should track this.
Indirect Receipts. Means receipts which pertain, or are incidental, to a scheme or work, but cannot be directly taken into such detailed accounts of it as are incorporated in the regular accounts of the receipts of the Public Works Department or any other department authorised to undertake such work.
“Direct Receipts” are those items of revenue receipts which are realized in connection with a work or project, either by officers of the Public Works Department or other departments and are brought to account directly as appertaining to the work or project.
Imprest
An imprest is a cash account that a business relies on to pay for small, routine expenses. Funds contained in imprests are regularly replenished, in order to maintain a fixed balance.
The term “imprest” can also refer to a monetary advance given to a person for a specific purpose.
- Imprest refers to a type of cash account maintained by a company used to pay for small incidental or routine expenses.
- A fixed account balance is established in the imprest account and refunded as needed when money is withdrawn for items like payroll, travel, or petty cash.
- Because of its small and fixed nature that is easily monitored, imprest discourages unauthorized or lavish expenses.
How Imprest Works
The most well-known type of imprest is a petty cash account, which is used to cover smaller transactions when it’s impractical or inconvenient to cut checks. Such accounts maintain a set amount of cash on-site, which can be used to reimburse employees and pay for small expenses. Petty cash funds are typically handled by custodians who monitor the account and dispense cash to employees, who in turn furnish business-related receipts.
Imprests may also be used to cover employee payroll, dividends, employee travel, and bonuses. After these outgoing expenses are paid, the fund is typically reimbursed by capital from the company’s primary bank account.
Imprests deter the use of unauthorized spending because the funds are earmarked for specific purposes. Consequently, imprests typically pay out the same amount of money on a regular basis, which ideally brings the account to a near-zero balance, before it’s automatically replenished with that same set amount of money. This system makes it easier to monitor expenses, flag discrepancies, and ultimately detect fraud.
The Imprest System
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 monitored closely for any discrepancies between expected cash (based on documentation) and actual cash. If any discrepancies exist, they are investigated.
The Future of Imprests
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.
Course Purchase Query 