Petty cash book

By: Rashid Javed | Updated on: November 25th, 2021

Besides maintaining a main or general cash book, many companies also maintain a small cash book known as petty cash book to record small day to day expenditures of the business.

Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel, newspapers, cleaning, pins, and causal labor etc. These small expenditures are usually paid using coins and currency notes rather than checks. The person responsible for spending petty cash and recording it in a petty cash book is known as petty cashier.

The chief cashier (also known as head or main cashier) bears the heavy responsibility of maintaining company’s general cash book in which receipts and payments amounting to hundreds or even thousands of dollars are recorded by him every day. He, therefore, usually delegates the responsibility for handling small day to day cash transactions to a bookkeeper, receptionist or some other reliable staff member. Like a general cash book, a petty cash book has a debit and a credit side. All receipts are recorded on the debit side and all payments are recorded on the credit side of petty cash book by the petty cashier.

Petty cash systems

The cash allocated for petty expenditures for a specific period is entered on the credit side of general cash book and on the debit side of petty cash book.

The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below:

1. Ordinary system

Under ordinary system, a lump sum amount of cash is given to the petty cashier. When the whole amount is spent, the petty cashier submits the details of petty expenditures recorded in the petty cash book to the head or chief cashier for review.

2. Imprest system

Under imprest system, a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists of a week or month. At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. The total cash spent by the petty cashier during the period is reimbursed to him and the total cash available to spend at the start of the next period becomes equal to the original sum (i.e., float). At any time, the total of petty cash balance and all expenditures that have not been reimbursed to the petty cashier is equal to the agreed float.

Advantages of imprest system:

The imprest system of petty cash is used by most of the companies because of the following advantages:

  • The imprest system reduces the chances of misuse of cash because the float can be immediately reduced if it is found to be more than adequate for the agreed period.
  • Under this system, the chief cashier periodically checks the record of petty cash. If an error is committed by petty cashier, it can be detected and rectified soon.
  • It saves the time of the firm’s chief cashier who is usually a busy person with heavy responsibilities of handling large receipts and payments by cash and checks.
  • The imprest system enables significant saving to be effected to post small items to accounts in the ledger since it uses an analysis system that collects small items together into weekly or monthly totals.
  • This system trains young staff members in handling cash with responsibility.
  • There are little to no chance of misappropriation of cash by the person in charge because the imprested sum is usually very small.

Format of petty cash book

A simple format of petty cash book is given below:

A D V E R T I S E M E N T

Example

The petty cashier of John and James Company paid cash for the following expenditures during March 2018.

  • March 01: Balance brought forward; petty cash $50.
  • March 01: The amount of petty expenditures for previous moth reimbursed by chief cashier $200.
  • March 05: Bought some liquid material for cleaning purpose $25.
  • March 10: Paid $20 for van wash.
  • March 13: Bought pens and pencils $15.
  • March 17: Paid for fuel $35.
  • March 20: Paid $55 for casual labor.
  • March 22: Donated $10 to SBA – a charitable institution.
  • March 30: Bought a broom for office $5

Required: Record the above transactions in a petty cash book assuming a petty cash imprest system is used by the John and James company.

Solution

More from Cash book (explanations):
A D V E R T I S E M E N T
170 Comments on Petty cash book
          1. If the cash book and petty cash book are both books of prime entry what happens when both books are posted to the ledgers
            Do they end up duplicating the same transaction
            Thanks
            Anne

      1. Great. Thanks for sharing.
        But what if the expenses made at the credit side is bigger than dr side of petty cash book.
        Eg 3000 cash float and expenses is 3020.

  1. Thanks a lot, my question is how can i enter transactions in a cash book marked with date.particullar.vn,pr,debit ,credit and balance colomn?

  2. please help me tomorrow 9th april is boookkeeping waec paper>send me answer throught phone pleas>08187485783

  3. This information really helps me for the challenging test I’m about set in the next hours, so thanks thanks very much for this vital information that keeps me well in this quest towards my ambitions…thanks much to whom have this information as an investment in the development of the human conceptual capability for progression in this challenging worlds of own dependencies without the reliability.

  4. Please, in the examples if they provide just the word “Detail ” which side did the transaction go and under what expenses?

  5. Please, in the examples if they provided just the word “Detail ” which side did the transaction go and under what expenses?

  6. I understand only small amounts of money are recorded in the petty cash what is the maximum amount of money that can be recorded in the petty cash

  7. Thanks allot is really is helpful.
    But my question is that.
    The rules of cashbook are to debit receipts and credit payment why is it that discount allow is recorded at the debit side instead of credit side since it’s an expenses.and why discount received is recorded at the credit side instead of it being at the debit side since it’s income

  8. If we are told petty cashier presented vouchers to cashier and obtained cash to restore the interest …. what is that

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