Accounting Project Topics

The Effects of Imprest System on Cash Management

The Effects of Imprest System on Cash Management

The Effects of Imprest System on Cash Management

Chapter One

Objectives of the Study

  1. To find out the effect of an imprest system on cash management.
  2. To determine how effective the imprest system is.
  3. To find out the challenges of the imprest system.




The imprest system is a form of financial accounting system. The most common imprest system is the petty cash system. The base characteristic of an imprest system is that a fixed amount is reserved, which after a certain period of time or when circumstances require, because money was spent, it will be replenished. This replenishment will come from another account source, e.g., petty cash will be replenished by cashing a cheque drawn on a bank account.

Conceptual Clarifications

 Cash Concept

According to (Davidson et al, 1999), cash is any medium of exchange, which is immediately negotiable. It must be free of restriction for any business purpose. Cash has to meet the prime requirements of general acceptability and availability for instant use in purchasing and payment of debt. Acceptability to a bank for deposit is a common test applied to cash items. This is a process of Planning, controlling, and accounting for cash transactions and cash balances. It is channeling available cash into expenditures that enhance productivity, directly or indirectly.

In addition, Cash is ready money in the bank or in the business. It is not inventory, it is not accounts receivable (what you are owed), and it is not property. These might be converted to cash at some point in time, but it takes cash on hand or in the bank to pay suppliers, to pay the rent, and to meet the payroll. Profit growth does not necessarily mean more cash. (Davidson et al, 1999)

Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis: it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firm’s manufacturing operations while excessive cash will simply remain idle. Without contributing anything towards the tint’s profitability. Thus, a major function of the financial manager is to maintain a Sound cash position. (Pandey, 2007)

Cash is the money which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm, and balances in its bank accounts. Sometimes near-cash items, such as marketable securities or bank times deposits, are also included in cash. The basic characteristic of near-cash assets is that they can readily be converted into cash. Generally, when a firm has excess cash, it invests it in marketable securities. This kind of investment contributes some profit to the firm. (Hampton, 2001)





This chapter is concerned with the presentation of the method used in this study to accomplish its purpose on “the effects of imprest system on cash management”. The following areas are taken into consideration, the research design, area of the study, population of the study, sample and sampling technique, sources of data and method of data collection as well as method of data analysis.

Research Design

This research design is the framework which specifies the types of information to be collected, the sources of data and data collection technique, a good design always ensure that the information gathered is consistent with the study objectives and the data are collected through the most accurate procedure Anyawu (1994). This research design is descriptive.

 Area of the Study

This study was to examine the effects of imprest system on cash management using selected small business firms in Calabar.

Population of the Study

The population of the study comprises of all the staff of selected small business firms in Calabar was estimated to be 30 in all the departments. The emphasis is placed on staff knowledge and information concerning the subject of the study.




This chapter deals with the presentation of data analysis and interpretation of data collected. The data was collected was through the use of questionnaire while the analysis was based on the research questions and research hypothesis stated earlier in chapter one of this study.




This chapter presents the summary, conclusion and recommendations for further studies.


This study was carried out to examine the effects of imprest system on cash management using selected small business firms in Calabar. To achieve this objective, three research questions and one research hypothesis were formulated to guide this study. A structured questionnaire was use as the main instrument to gather data from 30 respondents in the selected small business firms in Calabar. Out of this number, 30(100%) copies of questionnaire were appropriately completed and returned for data analysis.

The data collected from the respondents were analyzed using simple percentage and tables to analyze the research questions while Chi-square statistical tool was employ to the research hypotheses. The findings revealed that; the effect of imprest system on cash management is effective.


Based on the findings of this study, it is concluded that petty cash imprest system provides a very efficient and convenient deterrent tool on any petty cash theft as surprise petty cash count can be conducted based on the concept that all actual petty cash vouchers(N) + remaining cash(N) should able to tally back to the petty cash float (N).

Furthermore, many businesses normally keeps a small amount of money to meet some small cash disbursements like payment of postage, medical claims, staff traveling claims. As the disbursements are for petty item hence the name petty cash


Based on the findings of this study, the researcher made the following recommendations:

  1. The petty cash float should be reviewed to ensure there should not be too frequent disbursement of petty cash which means that the initial establishment of the float is too low. It’s good to review the past three to six months petty cash disbursement before establishing the petty cash float.
  2. Sometimes, it is not the fault of the float but the definition of the term petty cash which should strictly be used for petty item that perhaps should be less than N50.00 (say)
  3. From a practical commercial standpoint, it is observed that only petty items should be disbursed vide the petty cash. However, don’t forget about some very urgent necessities which also needs to be paid by petty cash say for example, the urgent need to photocopy or plan printing many urgent sets of tender documents, etc which might suddenly deplete the petty cash float. However, at all times, the petty cash should be designed with the main objective of disbursement of very petty items and wherever possible any amount above certain threshold should be by cheques.
  4. Finally, imprest Cash Float system are particularly shown to be useful when a company has to operationally control many branches or overseas subsidiaries who need cash to run properly. If properly implemented, it deters cash frauds.


  • Akinyomi, O. J. (2014). Effect of cash management on profitability of Nigerian Manufacturing firms. International journal of marketing and technology, 4(1):129-140
  • Davidson, J. A; Gregorous, A. and Ghosh, S. (1999). Cash management and profitability of corporate firms. A case study: MTN Uganda Ltd. Batchelor’s degree – Business Administration. Of bishop Stuart University.
  • Ebben, J. J. and Johnson, A. C. (2011). Cash conversion cycle management in small firms: Relationships with liquidity, invested capital, and firm performance. Journal of Small Business and Entrepreneurship, 24(3):381-396.
  • Hampton, G. T. (2001). The business of sustainability. MIT Sloan Management Review.3-6.
  • Pandey, I. M. (2008). Financial Management. Vikas Publishing House PVT Ltd.
  • Waltson, S. & Head, A. K. (2007). Small business Cash Flow Management. (online).
  • Westerfield, H. C., Well, R., Pretotius, D., Ferreira, P. H., Badenhost, W. M. and Van Der Merwe, D. 2013. GAAP Handbook: Financial Accounting and Reporting Practice. Durban: Lexis Nexis.