The petty cash account is a current asset and will have a normal debit balance (debit to increase and credit to decrease). To permit these cash disbursements and still maintain adequate control over cash, companies frequently establish a petty cash fund of a round figure such as $100 or $500. Required: Record the above transactions in a petty cash book assuming a petty cash imprest system is used by the John and James company.At times, every business finds it convenient to have small amounts of cash available for immediate payment of items such as delivery charges, postage stamps, taxi fares, supper money for employees working overtime, and other small items.

March 22: Donated $10 to SBA – a charitable institution.

March 05: Bought some liquid material for cleaning purpose $25.

March 01: The amount of petty expenditures for previous moth reimbursed by chief cashier $200.

March 01: Balance brought forward petty cash $50.

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

There are little to no chance of misappropriation of cash by the person in charge because the imprested sum is usually very small.Ī simple format of petty cash book is given below: Example.

This system trains young staff members in handling cash with responsibility.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.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.If an error is committed by petty cashier, it can be detected and rectified soon. Under this system, the chief cashier periodically checks the record of petty cash.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.The imprest system of petty cash is used by most of the companies because of the following advantages: 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. 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 the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. 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. 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. Under ordinary system, a lump sum amount of cash is given to the petty cashier. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below: 1. 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. 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.

Like a general cash book, a petty cash book has a debit and a credit side. He, therefore, usually delegates the responsibility for handling small day to day cash transactions to a bookkeeper, receptionist or some other reliable staff member. 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. The person responsible for spending petty cash and recording it in a petty cash book is known as petty cashier. These small expenditures are usually paid using coins and currency notes rather than checks. 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. 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.

Learning factory petty cash form