How to prepare the Petty Cash Book (imprest system)

Books of Prime Entry

What you need

• The fixed imprest amount set by the chief cashier, for example RM300.
• Petty cash vouchers and supporting receipts for every payment.
• A list of analysis columns by type of expense (Stationery, Postage, Travelling, Sundry, Ledger).
• The cash book or bank account to record the reimbursement cheque.

Step by step

1. 1

   Set the imprest and record the receipt

   The chief cashier fixes the imprest and hands a cheque to the petty cashier. For Kedai Harmoni, an imprest of RM300 is received on 1 January. Record it on the debit (receipts) side of the Petty Cash Book: Debit Petty Cash Book RM300; Credit Bank RM300.

2. 2

   Set up the analysis columns

   On the credit (payments) side, set up a Total Payments column followed by analysis columns by type of expense: Stationery, Postage & Stamps, Travelling, Sundry Expenses and Ledger (Creditors). The date, voucher number and amount of each item are entered here.

3. 3

   Record each payment and spread it to an analysis column

   For each voucher, enter the amount in the Total Payments column, then copy the same amount into the correct analysis column. Kedai Harmoni example: 3 Jan stationery RM45 (Voucher 12) to Stationery; 8 Jan postage RM20 (Voucher 13) to Postage & Stamps; 12 Jan taxi fare RM35 (Voucher 14) to Travelling; 18 Jan stamps RM15 (Voucher 15) to Postage & Stamps; 22 Jan refreshments RM30 (Voucher 16) to Sundry Expenses; 25 Jan paid creditor Mr Lim RM55 (Voucher 17) to Ledger; 28 Jan cleaning materials RM25 (Voucher 18) to Sundry Expenses.

4. 4

   Total the columns and cross-cast

   Total each analysis column: Stationery RM45, Postage & Stamps RM35 (20+15), Travelling RM35, Sundry Expenses RM55 (30+25), Ledger RM55. Check that the sum of all analysis columns (45+35+35+55+55 = RM225) equals the Total Payments column of RM225. This check is called cross-casting.

5. 5

   Find the balance and close the book

   Find the balance: RM300 − RM225 = RM75. Write 'Balance c/d RM75' on the credit side on 31 Jan so that both sides balance at RM300. Bring down 'Balance b/d RM75' on the debit side on 1 Feb as the opening balance of the new period.

6. 6

   Reimburse (restore the imprest)

   On 1 Feb, the chief cashier reimburses the amount spent, RM225, to restore the float to the fixed RM300. Record on the debit side: Debit Petty Cash Book RM225; Credit Bank RM225. The debit balance is now RM75 + RM225 = RM300, the same as the original imprest.

7. 7

   Post the column totals to the ledger

   Post the total of each analysis column to the debit of the relevant ledger account: Debit Stationery Account RM45; Debit Postage & Stamps Account RM35; Debit Travelling Account RM35; Debit Sundry Expenses Account RM55; Debit Mr Lim (creditor) Account RM55. The Petty Cash Book acts as the credit for these entries.

Second example

Perniagaan Setia sets a fixed imprest of RM250 on 1 March. During March the total petty payments are RM180, so the balance c/d on 31 March is RM70 (250 − 180). Because petty spending is rising, the owner decides to raise the fixed imprest to RM350 from April. So on 1 April the reimbursement covers the RM180 spent plus the RM100 increase: the reimbursement cheque = RM180 + RM100 = RM280. Record Debit Petty Cash Book RM280; Credit Bank RM280. The new debit balance = RM70 + RM280 = RM350, the new fixed imprest. This shows that under the imprest system the reimbursement always brings the balance back to the current imprest, whether the imprest stays the same or is increased.

Common mistakes

Related chapter: Books of Prime Entry →

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