The Petty Cash Book records small, frequent payments such as stamps, taxi fares, drinks and stationery. It is kept by a petty cashier so the main cashier is not burdened with tiny transactions.
The Imprest System
Under the imprest system, the petty cashier is given a fixed amount called the float (imprest). At the end of a period, the amount spent is reimbursed so the float returns to its original amount.
Key idea
Reimbursement = amount spent during the period. Opening float − payments + reimbursement = original float.
Example
The float is RM300. During the month, RM185 is spent on various petty expenses.
| Details | RM |
|---|---|
| Opening float | 300 |
| Total spent | (185) |
| Balance in hand | 115 |
| Reimbursement received | 185 |
| Float restored | 300 |
Example
Every payment is supported by a petty cash voucher. The analysis columns classify expenses (stamps, transport, stationery) and each column total is posted to the ledger.
Recording steps
The float received is entered in the receipts column; each petty payment is entered in the total column and spread into the correct analysis column. At period end the analysis columns are totalled, the balance is struck, and a reimbursement equal to the amount spent is received from the main cashier. The imprest system also makes any shortage of cash easy to detect.
Remember
Advantages of the imprest system: expenses are easy to track, the risk of misuse is reduced, and the reimbursement equals the amount spent.