Petty cash book: worked examples

Method and where the marks are

The petty cash book handles the many small payments a business makes, so the main cash book is not cluttered with tiny amounts. Almost every question uses the imprest system. Under this system the petty cashier starts each period with a fixed float called the imprest amount, say RM500.

During the period the cashier pays out small sums for stamps, cleaning, refreshments and the like. At the end, the main cashier reimburses exactly the total spent, which restores the float to RM500.

So the reimbursement always equals the total payments. That gives you a natural check in your answer.

The layout has a single receipts column on the far left, then the date, details and voucher number. Next comes the total payments column, then several analysis columns on the right. The analysis columns sort each payment by type, such as postage, travel, stationery, cleaning and sundries.

A final ledger column holds any amount to be posted to a ledger account, such as a supplier's account. Enter each payment twice on the right-hand side, once in the total payments column and once in the right analysis column. This lets the totals cross-check.

Work in order. First enter the opening float on the receipts side, either as a balance brought down or as cash from the main cashier to set up the imprest. Then record each payment in date order, with the amount in the total column and the same amount in the right analysis column.

A payment that settles an amount owed to a supplier goes in the ledger column, not an expense column. At the end of the period, add up the total payments column. Then add across all the analysis columns.

The analysis columns must equal the total payments column. This cross-cast earns marks. If the totals disagree, an entry has been analysed wrongly.

Next, balance the book. The opening float less total payments gives the cash remaining. Carry it down as the balance.

Then show the reimbursement from the main cashier, which equals the total spent, so the new opening balance is once again the full imprest. For example, with a RM500 float and RM342 spent, the balance carried down is RM158.

The reimbursement is RM342, and the float is back to RM500. Showing that the reimbursement restores the imprest proves you understand the system.

Students most often forget the ledger postings. Post each analysis column total to the debit of the matching expense account in the general ledger. The petty cash book has already done the credit side.

So state that the postage total is debited to the postage account, the travel total to travel expenses, and so on. A ledger-column item, such as a payment to a creditor, is debited to that creditor's account.

Marks are mostly lost on these points. Do not enter the reimbursement as a payment. It is a receipt that restores the float.

Do not enter an amount in only an analysis column or only the total column, because the cross-cast then fails. If the question includes sales tax, separate the tax from the net expense in a tax column. Remember two checks: reimbursement equals total payments, and the restored float equals the original imprest.

If your petty cash books never quite cross-cast, one of our teachers can go through your columns with you and find the slip. Book a trial class