Accounting guide to a petty cash book.pdf

petty cash book

1. 1


Petty Cash Book
A business may have a lager number of small value payments which it has to incur on a daily
basis. If all these transactions are recorded in the main cash book it would have the following
adverse implications.
(i) The size of the cash book would be enormous and it would be difficult to
manage.
(ii) The company would lose its focus on high value transactions.
Therefore all small cash payments (petty) are separately identified and recorded in the petty
cash book. Each business will decide on the level of payments that will be entered though the
petty cash book.

Petty cash Imprested System
In a company the level of cash that the petty cashier should possess would be determined by
the management. This is called the “Petty cash float.” This would vary depending on the size
and the requirements of the company.
Using this float the petty cashier would incur the expenses during the month. At the end of the
month the petty cashier would obtain a reimbursement of expenses incurred during the month,
after which the petty cash float would be restored. By doing so the company would ensure that
at any given point in time the maximum amount of cash that would be held by the petty cashier
is equal to the petty cash float. This control mechanism is called the “Imprested System of
Petty Cash”
X Limited

2. 2

Question
X Limited has a petty cash float of $700 during a given month his petty cash expenses
amounted to $650.
You are required to
(a) Calculated the balance of cash remaining in the cash box.
(b) The amounted required to restore the petty cash float.

Accounting Entries
When the petty cashier receive the cash float from the main cashier
Dr - Petty cash book
Cr - Main cash book

When payment are made during the month it is credited to the petty cash book and
extended to a suitable analysis column.
At the end of the month of totals of the analysis columns are debited to the respective
ledger accounts under the narration of petty cash.

Other transactions carried out through petty cash.
1. Reimbursements from staff E.g.: Telephone calls
Dr - Petty cash book
Cr - Respective Expenditure Account

2. Sundry / Scrap Sales.
Dr - Petty cash book
Cr - Sundry sales Account

3. 3

3. Staff Loans
Dr - Staff Loans Account
Cr - Petty cash book

4. Payments made to creditors
Dr - Payables Accounts
Cr - Petty cash book
In 3 and 4 above the payments is extended to the Ledger Accounts column in the Petty cash
book.
Jock Field
Question
The following is summary of the petty cash transactions of jock field Ltd for May 2008.
May 1 Received from cashier $ 300 as petty cash float.

$
May 2 Postage 18
3 Travelling 12
4 Clearing 15
7 Petrol for delivery Van 22
8 Traveling 25
9 Stationery 17
11 Cleaning 18
14 Postage 5

4. 4

15 Traveling 8
18 Stationary 9
18 Cleaning 23
20 Postage 13
24 Delivery Van 5000 miles service 43
26 Patrol 18
27 Cleaning 21
29 Postage 5
30 Petrol 14

You are required to:
(a) Rule up a suitable petty cash book with analysis column for expenditure on
cleaning, motor expenses, postage, stationary, Travelling.
(b) Enter the month’s transactions

(c) Enter the receipt of the amount necessary to restore the imprest and down
the balance for the commencement of the following month.
(d) State how the double entry for the expenditures completed:
Eddie Ltd
Question
Eddie Ltd operates its petty cash account on the impress system. It is maintained at a figure of $
1000 on the first day of each month.
Date Amount
1993 October $
1 Cash received to restore imprest ?

5. 5

1 Bus Fares 4.1
2 Stationary 23.5
4 Bus fares 10
7 Postage Stamps 17
7 Trade Journal 9.5
8 Bus Fares 6.4
11 Correcting fluid 12.9
12 Typewrite ribbon 54.2
14 Parcel Postage 34.5
15 Paper clip 4.2
15 Newspapers 26
16 Photocopier paper 16815
19 Postage Stamps 15
20 Drawing Pins 3.8
21 Train fare 54
22 Photocopier paper 56.3
23 Display decorations 30.7
23 Correcting fluid 11.4
25 Wrapping Paper 7.8
27 String 6.1
27 Cello tapes 7.5
27 Pens 4.6
28 Typewriter repair 136.6
30 Bus fare 20.9

6. 6

November
1 Cash received to restore imprest?
You are required to;
Record the company’s petty cash account for the month of October 1993. All items appearing in
the payments column should be analyzed individually into suitable expenses columns.
Hint: Prepare analysis columns for traveling, postage, stationary and miscellaneous expenses.

Excel Elementary School
Question
The following is a summary of the petty cash transactions of Excel Elementary school for
September 2003.
The transactions that were recorded in the petty Cash Book were:
2003
September $
1 The head teacher gives $ 300 as float to the petty cashier
payments out of petty cash during September
2 Petrol: School Bus 16
3 Postage 12
J Green – traveling expenses of staff 23
4 D Davies - traveling Expenses of staff 32
7 Cleaning Expenses 11
9 Petrol: School bus 21
12 K Jones – traveling expenses of staff 13
14 Petrol: School bus 23
15 L black – traveling expenses of staff 5

7. 7

16 Cleaning Expenses 11
18 Petrol: School bus 22
20 postages 12
22 Cleaning expenses 11
24 G Wood – traveling expenses of staff 7
27 Settlement of C Brown’s accounting in the Purchases Ledger 13
29 Postages 12
30 The head teacher reimburses the petty cashier the amount spent in the month.

You are required to
(a) Prepare a petty cash book with the following analysis columns. Motor expenses.
Staff traveling expenses, Postage, Cleaning & Ledger accounts.
(b) Complete the respective double entries at the month.
Kathryn Rochford
Question
Why does some business keep a petty book as well as a cash book?

(a) Kathryn Rochford keeps her petty cash book on the imprest system, the
imprest being $25. for the month of April 2004 her petty cash transaction
were as follows:
April 1 Petty cash balance 1.13
2 Petty cashier presented vouchers to cashier and
obtained cash to restore the imprest 23.87
4 Bought postage stamps 8.50

8. 8

9 Paid to Courtney Bishop, a creditor 2.35
11 Paid bus fares 1.72
17 Bought envelops 0.70
23 Received cash for personal telephone call 0.68
26 Bought petrol 10.00
(i) Enter the above transactions in the petty cash book and balance the petty cash book at
30 April, bring down the balance on 1 May
(ii) On 1 May Kathryn Rochford received an amount of cash from the cashier to restore the
imprest. Enter this transaction in the petty cash book
(b) Open the ledger accounts to complete the double entry for the following:
(i) The petty cash analysis column headed Postages and stationary and Travelling
expenses
(ii) The transactions dated 9 and 23 April 2004
Question
X Ltd’s operates an imprest system for petty cash. At 1
st
March there was a float of $200 which
was increased to $350 from 1
st
April onwards. During March the petty cashier obtained
reimbursements of $400 and $50 recovered from staff for personal telephone calls.
A staff loan of $ 70 was also paid through petty cash.

9. 9

Petty Cash Book






Rec.



L/F
Particulars




Vou
No



Total

Analysis Colum



L/F



Ledger
A/C
Cleaning

Postage
&
Stationary
Motor
Expense
Traveling