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

A D V E R T I S E M E N T
154 Comments on Petty cash book
    1. Consolatha

      It is good, thank you

      1. Mijah

        hey, i want to ask how about “paid off creditor” and “loan to employee”

        1. Aziz

          Those are big expenditures so they go to cash book if they were paid

        2. Umar dan masana

          You should open ledger column

          1. Anne Fothergill

            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

        3. Panditha Bandara

          These payments are recorded in sundry column.

          1. Mchupa

            Sorry can you help about that sundry column

        4. Richard Anseeku

          That would go to Ledger Account

          1. Richard Anseeku

            In a different column

    2. Omran

      Good and easy to understand
      Great job !

    3. Flora Djite

      Thanks a million, it’s really helpful.

      1. Emmanuel viery

        Thanks.Its really helpful

    4. Samiath

      You are excellently organized…thank you.

    5. Bernard

      Its so easy to understand ..thanks alot

      1. Ose AIDANMWOSA

        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. Niola

          Its very good thanks

  1. Mehreen

    Excellent explanation

    1. sir Nicholaus

      yaaaa exactly

      1. Grace Mkumbwa

        Very nice

  2. YUNUS

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  3. hassan salum

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  4. Betty Stuartez

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      1. Muhammad Abdul kadir

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  5. Ben Salaash

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  6. Ferdinand Rutto

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  7. Dennis

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  8. Acaa Joyce

    thanks for the wonderful information which is so understandable and interesting. hope for more

  9. edris

    it is so good and help full i hope for others

  10. Aguli Sura

    good explanation and precise to understanding petty cash basics

    1. Muhindo Tom

      Zso precise

  11. J K Amoah

    Well explained.

  12. Beatrice

    Well explained
    looking for a job any help have a degree in informatics

    1. Goodhope Thomas

      u speak truth my sister

    2. Adiba

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  13. OLIVER EYA

    Love this is so understandable and also enlighting

  14. atong deborah

    clear , i can easily understand but the problem still cannot get how the balance brought down is done

    1. Accounting For Management

      The balance carried down of previous period becomes the balance brought down in current period.

  15. credo innocent

    good work

  16. Darlington

    How Do You Balance The Petty Cash Book When The Amount Spent By The Cashier Is Greater Than The Float

  17. joshua

    Woundver really helped me much to review my work as young employee in HAFRID INVESTMENT AGENCY

  18. steven

    Understandable explanations
    Thanks

  19. Shweta mishra

    if the reimbursement amt is not given then wat to write

  20. Danny

    Thank you very much
    I understood

  21. timothy angulu

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  22. SarithaHarsha

    paid to Mr.X rs200
    how we treat this in petty cash book

  23. Thin Thin soe

    Thank you

  24. KENNETH MURIMI

    what is VN

    1. Accounting For Management

      VN stands for voucher number.

    2. susana

      is the voucher no. or will say receipt no.

  25. Daniel Bukuku

    It is well understable keep up giving us the material required for our studies God bless you.

    1. Michael Jongle

      why is Causal labor recorded on sundry ledger column ??
      Jongle Michael

  26. Barkathullah

    Spectacular…..work….

  27. trinkly

    thanks that is excellent work

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    1. Goodness Ejike

      Tanx a much
      It’s really helpful
      I learnt a lot

  29. EMMA

    thanks so much. How woud enter a cash book with debit,credit and balance colomn?

  30. EMMA

    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?

  31. juliet

    wonderful but need more information on how to treat credit balance in the petty cash book

  32. Francis Ilado

    well understood good work

  33. Adeoti Irawomitan

    It A Nice Solution Thank U.

  34. Jackline makena

    Very helpful be blessed

    1. JULIUS MSAFIRI

      thank you

  35. ngebe kambi silas

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  36. Teno Boris

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  37. Tiwa

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  38. Sulakshi

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  40. kamugisha

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  47. Ronnica David

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  48. Turinawe Gilbert

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  49. NSOH ETIENNE

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  53. Steven

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  54. Manuel

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  55. Samuel

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  56. Sheila

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  57. Egolum Priscilla Uchenna

    That’s splendid. Highly understandable. I appreciate

  58. Aminu

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

  59. Aminu

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

    1. Adiba

      i think on the credict side

      1. Esther

        Payment voucher is the source document for the petty cash book. Petty expenses

  60. Opa

    How do you get the balance

    1. warren barasa

      it’s easy to understand

  61. Morbie

    I guesse i kinda understood .Buh not really otherwise its cool

  62. John R. Msengi

    Simple and clear.
    Thanks

  63. wifoma

    Good work, easy to understand n put into practice

  64. Amanda

    And so is it in a smaller form or a bigger form

  65. Chama

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  66. Shalom

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  67. Esenam

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  68. Jok Maker Kur or daniel

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  69. Nagare YAGANAME

    So interesting and much appreciation goes to the developer.

  70. Dammy

    Please under what expenses is for telephone

  71. John Faith

    thanks a lot

  72. smart

    well explained…

  73. Yusuf lukman

    Good thank you so much for the explanation
    Pls I need a analyzing of items in petty cash book

  74. Lisa Blink

    Thank you ,clear , but i dont understand how the balance is carried and brought down. could you explain??

  75. SANA

    you don’t have to be that rude!

  76. Jason

    Very good explanation

  77. Justus muasa

    Good of u

  78. Yousuf

    Can anybody say, in which column does the ‘labour charge/cost falls in petty cash book?

  79. JULIUS MSAFIRI

    thank you

  80. Young Rock 🎸🎸

    Thanks a lot that’s nice

  81. Henrick Kunambi

    It is necessary to open the ledger ?

  82. Kaothar

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  83. vaishali

    simple & easy to understand

  84. Modi Meldon

    Greet job dear

  85. Jonbenah

    Perfect it helped me do my assignment

  86. Jamil abeid

    How come in general ledger. Thanks for good work.

  87. Nancy

    Nice. But some of it are not in my note but thanks😉

  88. Musa IBRAHIM

    How do I identify the expenses in to their appropriate classes

  89. Nneka Obasi

    Is this this the calculations

  90. Leonard muthuri

    How do i identify transactions with their respective expenses
    Are the expenses column only four?

  91. David jumbo

    So helpful thanks

  92. secretgirl

    tnx for this example it was very helpful for me

  93. Matipa

    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

  94. phatechiharmarkah

    Thanks alot

  95. Margret

    Sir can I get more examples

  96. Cro~wn

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  97. John

    Can aTrial balance be driven from petty cash book

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