Petty cash, IMPREST system

1. Petty Cash and
the IMPREST system
DBS3024 BUSINESS TRANSACTION
by
Stephen Ong
Visiting Fellow, Birmingham City
University Business School
Visiting Professor, Shenzhen University

2. • Petty Cash1
• The imprest system2
• The Bank Cash Book3
Today’s Overview

3. 1 - 3
Learning objectives
 Explain why many organisations use a petty
cash book
 Make entries in a petty cash book
 Transfer the appropriate amounts from the
petty cash book to the ledgers at the end of
each period
 Explain and operate the imprest system for
petty cash
 Explain why some organisations use a bank
cash book
 Make entries in a bank cash book

4. 1 - 4
1
Petty Cash

5. 1 - 5
The petty cash book
 Every business has a number of
transactions of very small value
that would clutter the cash book.
 By recording these transactions in
the petty cash book, it frees the
cash book for important
transactions.
 Using a petty cash system allows a
junior member of staff to have
some responsibility.

6. 1 - 6
The petty cash system
 When petty cash is being claimed,
the claimant will have to fill in a
voucher, detailing what the
expenditure was for.
 A bill or receipt for the expenditure
should be attached to the voucher.
 The claimant should sign the
voucher to certify that their
expenses had been received from
the petty cashier.

7. Petty Cash Voucher
CLAIMAN
CLAIMANT
Number
Date
Description of
Expense
Claims
Amount
of
Expense
Claims
(RM)
Petty Cashier
TOTAL
(RM)

8. Example of Receipt as Evidence

9. Petty Cash Transactions

10. Petty Cash Book

11. Cash Book & General Ledger

12. 1 - 12
2
The Imprest System

13. 1 - 13
The imprest system
 A petty cash book run under the
imprest system allows enough cash to
meet petty cash expenditure for a
particular period.
 At the end of the period, the cashier
determines the amount spent.
 In exchange for the vouchers, the
cashier tops the petty cashier’s float up
to the original level.

14. The IMPREST System

15. 1 - 15
An example of the imprest system

16. 1 - 16
An analytical petty cash book

17. 1 - 17
The postings from the petty cash book

18. 1 - 18
3
The Bank Cash Book

19. 1 - 19
Bank cash book
 Nowadays, many businesses have only a small
number of sales that are paid for with cash and
credit cards, cheques, and direct transfers are
used.
 In this case, a business may choose to run a
petty cash book and a bank cash book,
meaning that all cash payments are entered
into the petty cash book and the bank cash
book contains the bank and discount columns
only.
 A bank cash book has an extra column to
detail what has been banked.

20. 1 - 20
Bank cash book (Continued)

21. 1 - 21
4
Activity

22. Activity : Petty Cash Vouchers

27. 1 - 27
Learning outcomes
You should have now learnt:
1.That the petty cash book saves (a) the
cash book and (b) the ledger accounts
from containing a lot of trivial detail
2.That the use of the petty cash book
enables the cashier or a senior member
of staff to delegate this type of work to a
more junior member of staff
3.That the cashier should periodically
check the work performed by the petty
cashier

28. 1 - 28
Learning outcomes
(Continued)
4.That all payments made by the petty
cashier should have petty cash
vouchers as evidence of proof of
expense
5.How to enter petty cash transactions
into the petty cash book
6.How to transfer the totals for each
expense recorded in the petty cash
book to the appropriate ledger
accounts

29. 1 - 29
Learning outcomes
(Continued)
7. How to operate a float system for petty
cash
8. The difference between a cash book
and a bank cash book
9. Why some organisations use a bank
cash book instead of a cash book

30. Resources : Core Reading
 Wood, Frank and Robinson, Sheila
(2009) Bookkeeping and Accounts
,7th Edition, Pearson/ FT Prentice Hall
 Wood, Frank and Sangster, Alan
(2012) Business Accounting ,12th
Edition, Pearson/ FT Prentice Hall
 Fortes, Hilary (2011) Accounting
Simplified , Pearson/ FT Prentice Hall

31. QUESTIONS?