PETTY CASH BOOK

In many business there are small payments (expenses) that are made on a regularly basis.
Examples of these payments are:

1. Stationery

2. Petrol

3. Cleaning supplies

4. Travelling

5. Postage

These small payments (expenses) are recorded in a book which is called the Petty Cash Book. It
is the norm to have one person in charge of this book and that person is called a Petty Cashier.
Each time the cashier gives money to the petty cashier, the following will be done:

● The cashier will – Credit the Cash Book

● The petty cashier will – Debit the Petty Cash Book.

For accountability each time the petty cashier makes a payment he/she prepares a voucher
which is given to the respective individual. The voucher will contain information such as:

1. Voucher number

2. What the payment is for

3. Signatures of both the petty cashier and the person to whom the money was given

NB. In some cases a receipt or bill will be attached to the voucher.

Advantages of using a Petty Cash book

1. It reduces the number of entries found in the cash book since payments are entered in the
petty cash book.

Reminder: The main cashier of the business will give the petty cashier the money for
distribution of the small payments. When this is done the cashier will credit the cash book
and the petty cashier will debit the petty cash book.

2. Normally a junior member of staff is given the responsibility of managing the petty cash book
(petty cashier). This will therefore allow the main accounting personnel to deal with the major
money transaction

Imprest System

The petty cashier starts each period with an original amount which is called the FLOAT. At the
end of the period the petty cashier will be reimbursed, refunded or given back the money that
was paid out during the period. This is what is referred to as the imprest system.
Reimbursement can also be done during the period. This can occur if the number of payments
or the amounts has increased. The float can be increased or decreased at any time.

Analytical Petty Cash Book

This book shows the breakdown of the various small payments which were made. Therefore,
there will be an individual column for each small payment (expense). The total from each
column will be transferred to the respective expense account in the General Ledger.

NB. The ledger folio and ledger account columns are used when a creditor is paid or a debtor
is refunded from the petty cash.

Balancing-Off

The petty cash book can be balanced off using one of two (2) methods:

1. Balance off at the end of the current period and reimburse at the beginning of the next
period.

2. Reimburse at the end of the current period and then balance off.
Example: Method 1

Prepare a petty cash book that has analysis columns for travelling, motor expense and
stationery. This is to be kept on an imprest system, the amount spent is to be reimbursed at the
beginning of the next month. The opening petty cash float is $2 000. The business treats all
payments $500 and less as petty cash payments.

DR CR (Analytical Columns)

Receipts F Date Details Voc. Total Travelling Motor Stationery

# Expense

$ 2020 $ $ $ $
2 000 CB Jan 1 Cash
Jan 3 Stationery 01 150 150
Jan 5 Travelling 02 200 200
Jan 6 Travelling 03 100 100
Jan 11 Stationery 04 500 500
Jan 15 Motor Expense 05 300 300
Jan 20 Travelling 06 100 100
Jan 22 Motor Expense 07 450 450
1 800 400 750 650
Jan 31 Balance c/d 200 GL GL GL
2 000 2 000
200 Feb 1 Balance b/d
1 800 CB Feb 1 Cash

DR Cash Book (Cash column only) CR

$ 2020 $

Jan 1 Petty Cash PCB 2 000

Feb 1 Petty Cash PCB 1 800

Example: Method 2

Prepare a petty cash book that has analysis columns for travelling, motor expense and
stationery. This is to be kept on an imprest system, the amount spent is to be reimbursed at the
last day of the month. The opening petty cash float is $2 000. The business treats all payments
$500 and less as petty cash payments.

DR CR

Receipts F Date Details Voc. Total Travelling Motor Stationery

# Expense

$ $ $ $ $
2 000 CB Jan 1 Cash
Jan 3 Stationery 01 150 150
Jan 5 Travelling 02 200 200
Jan 6 Travelling 03 100 100
Jan 11 Stationery 04 500 500
Jan 15 Motor Expense 05 300 300
Jan 20 Travelling 06 100 100
Jan 22 Motor Expense 07 450 450
1 800 400 750 650
1 800 CB Jan 31 Cash GL GL GL
Jan 31 Balance c/d 2 000
3 800 3 800
2 000 Feb 1 Balance b/d

General Ledger

DR Motor Expense A/C CR

$ $
Jan 31 Petty Cash PCB 750