Petty Cash Book

Explanation

The Petty Cash Book (PCB) is one of the books of prime entry set aside to record petty (small-value but frequent) expenses that occur in daily business operations, such as postage and stamps, stationery, refreshments, taxi fares and office cleaning. The main purpose of the PCB is to separate the many small-value transactions from the main Cash Book so that the main Cash Book is not cluttered with trivial entries. It also lightens the main cashier's workload, reduces the chance of errors, and allows authority to be delegated to a junior employee known as the petty cashier or imprest holder. The PCB is controlled by the main cashier, who provides a fixed sum of money to the petty cashier at the start of each period.

The system used to operate the PCB is the imprest system. Under this system, the petty cashier is given a fixed sum at the start of a period called the imprest or float, for example RM500. During the period, the petty cashier makes petty payments out of this float, and every payment must be supported by a numbered and approved petty cash voucher. At the end of the period, the total amount spent is reimbursed (restored) by the main cashier so that the petty cash balance returns to the original imprest amount. This means that at the beginning of every period the petty cashier always holds the same imprest amount. This is the main advantage of the imprest system: it makes control easy and quickly reveals any misappropriation.

The PCB is usually prepared in an analysis-column format. The left side (one column) records receipts, that is, the imprest received from the main Cash Book and the reimbursement money. The right side contains columns for the date, particulars, voucher number, a total payment column (the full amount of each payment), and several analysis columns classified by type of expense such as Postage and Stamps, Stationery, General Expenses, Fares, and a Ledger column (for payments to creditors or items that do not fit a category). Each petty payment is recorded twice on the same line: once in the total payment column and once in the relevant analysis column. This columnar format makes it easy to separate and total each type of expense for posting to the ledger.

To record petty expenses, the petty cashier receives an approved petty cash voucher for each payment, then enters the date, particulars and voucher number in the PCB. The amount is entered in the total payment column and simultaneously in the appropriate analysis column. At the end of the period, each analysis column is totalled, and the sum of the analysis columns must equal the total of the total-payment column as a cross-check. The total of each analysis column is then posted to the debit side of the respective expense account in the General Ledger, while the imprest and reimbursement are recorded on the credit side of the main Cash Book (and debit side of the PCB).

The process of restoring the imprest (balancing and reimbursement) is carried out at the end of the period. The petty cashier totals all payments, balances the PCB to obtain the balance carried down, and claims the amount spent from the main cashier. The reimbursement received is recorded in the receipts column at the start of the next period, bringing the petty cash balance back to the original imprest amount. For example, if the imprest is RM500 and RM362 was spent, then the reimbursement is RM362 and the balance carried down into the new period is RM500. This cycle repeats each period.

Worked examples

Practice

Exam tips

Key terms

Petty Cash Book (Buku Tunai Runcit)

A book of prime entry used specifically to record petty expenses that are small in value and occur frequently.

Imprest (Panjar)

A fixed sum of money given to the petty cashier at the start of a period to make petty payments.

Imprest System (Sistem Panjar)

A method of operating petty cash in which the balance is restored to the original imprest amount at the end of each period.

Petty Cash Voucher (Baucar Tunai Runcit)

A numbered, approved source document supporting each petty payment recorded in the Petty Cash Book.

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 4

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