PETTY CASHBOOK

Section 3: Books of Original Entry

Objectives
1. Identify the source documents used when recording petty cash transactions.

2. Prepare a petty cash book with analysis columns using the imprest system.

3. Post the details recorded in the petty cash book to general ledger and purchases ledger accounts,
including the use of folio references.
The Petty Cash Book
Petty cash book
Petty cash book is a book of original entry used for recording small cash payments with information taken
from petty cash vouchers. The petty cashier often has a float (called an imprest) to used for these
payments. Small cash payment and receipts can be omitted from the Cash Book to avoid overcrowed.
When this is done, a Petty Cash Book is used. The format of the Petty Cash Book facilitates the analysis of
transactions so that certain types of transactions can be posted in aggregates to the ledger. The debit side of
the Petty Cash Book represents receipts whilst the credit side, which represents payments, is divided into
several analysis columns.
 PETTY CASH BOOK
Receipts Date Particulars Voucher No. Total Travelling Postage Stationery Office
Expenses

                 
                 
Key terms
Petty cash
Petty cash is small cash payment.

Imprest
Imprest is the maximum amount that the petty cashier is allowed to handle at any given time. It is
sometimes called float.
Imprest system
A system where a refund is made of the total paid out in a period.

Petty cash voucher

The source document for each petty cash payment.

Analysis columns
In a petty cash book the analysis columns means classifying each payment to provide totals to be posted to
the general ledger accounts.
How are petty cash transactions
recorded?
o Step 1
Receiving the float. The petty cashier receives the float/imprest in the form of cash or perhaps a cheque that
needs to be cashed. The double-entry record require is:
 Debit the petty cash account
 Credit the cash or bank column in the main cash float.
o Step 2
Recording a petty cash payment. Using information shown on each petty cash voucher, the petty cashier makes
the following record in the petty cash book:
 Credit the petty cash account
Make a second entry in the appropriate analysis column.
o Step 3
Balancing the petty cash book. The petty cash account is balanced in the usual way and the balance brought
down to start the next period. At this point, the petty cashier needs more cash to cover the next period’s cash
payments. The petty cashier is reimbursed for the last period’s payments and debit the petty cash account with
the amount received. By receiving back exactly what was spent in the previous period, the float/imprest is
restored.

o Step 4
Totalling and posting the analysis columns. Finally, the analysis columns are totaled and each total is posted to
the relevant ledger accounts. Usually these postings are to expense accounts, but in some cases it is possible that
an account payable is paid in petty cash because only a very small amount is due.
THE END