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LALL POA LESSONS

Syllabus Objective SESSION 19 9. Balancing the petty cash book using the Imprest
System

Having examined the Cash Book in our last session, we have learnt that Cash transaction are
treated differently from Credit transactions.
It must be noted that Cash transaction can vary in amounts. Some tend to be large transactions
whilst some are smaller in nature. This is where the Petty Cash Book comes into play.
These smaller type of expenditure can be:
1. Purchase of postage stamps
2. Posting of a parcel to a customer
3. Travel Expenses
4. Cleaning Materials
5. Stationery
These items purchased are usually paid for in cash by a member of staff on behalf of the
organization who then seeks reimbursement of the amount spent.
The petty cash book is a book of original entry since items are entered here first and it also
acts as a ledger account for the cash in hand at any point.
A petty cash voucher is used when these small expenditure occurs.

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The Imprest System

is where the cashier gives the petty cashier enough cash to meet the needs for the next period.
At the end of the period, the cashier finds out the amounts spent by the petty cashier, and tops
up the petty cashier’s cash by an amount equal to that spent.

It may be necessary to increase the fixed sum, often called the cash float, to be held at the start
of each period. In the above case, if we had wanted to increase the float at the end of the
second period to $120, then the cashier would have given the petty cashier an extra $20, that
is, $84 + $20 = $104.

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Advantages of using the petty cash imprest system

1. A junior member of the accounts department, usually called the petty cashier, can be given
the task of operating the system thus allowing the cashier to concentrate on other areas of
work.
2. Small items of expenditure incurred by the organization are entered into the petty cash book
and only the totals at the end of the period are posted to the appropriate accounts in the
general ledger. This eliminates numerous transactions from the main cash book and ledger
accounts.
3. The imprest system enables the cash to be checked at any time since the amount paid out,
represented by the petty cash vouchers, and the cash in hand should equal the float at the
beginning of the period.

Example

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Dr Petty Cash Book (pg 31) Cr

Staff
Motor travelling Ledger Ledger
Receipts Folio Date Details Voucher No. Total Expenses expenses Postage Cleaning folio Accounts
$ $ $ $ $ $ $
600 CB 19 1-Sep Cash
2-Sep Petrol 1 63 63
3-Sep K. Long 2 32 32
3-Sep Postage 3 24 24
4-Sep D. Campbell 4 21 21
7-Sep Cleaning 5 15 15
9-Sep Petrol 6 19 19
12-Sep K. Lee 7 30 30
14-Sep Petrol 8 35 35
15-Sep L. Waites 9 50 SL121 50
16-Sep Cleaning 10 15 15
18-Sep Petrol 11 24 24
20-Sep Postage 12 28 28
22-Sep Cleaning 13 19 19
24-Sep H. Wood 14 75 75
27-Sep K. Young 15 33 PL18 33
29-Sep Postage 16 22 22
505 141 158 74 49 83
30-Sep Balance c/d 95 GL17 GL29 GL44 GL64
600 600
95 1-Oct Balance b/d
505 CB22 1-Oct Cash

N.B. Notice that the total spent for the period ($505) would be the same as the amount needed
to reimburse (reimbursement) the petty cash to the original balance ($600).

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Another way of looking at the reimbursement of petty cash:

Once the petty cash book has been completed, the double entry (Ledgers) must now be
completed for all of the items noted there.

• We are assuming that the money for the petty cash was taken from the business’s bank
account (cash book).

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Exercise
Write up a petty cash book with analysis columns for office expenses, motor expenses, cleaning
expenses and casual labour. The cash float brought down is $500 and the amount spent is reimbursed
on 30 June. Show the balance carried down to 1 July 2017. Also show how the items for motor expenses
and office expenses would appear in the general ledger.

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