Definition and uses of the Petty Cash Book

WEEK FIVE AND SIX DATE ………………

TOPIC: Petty Cash Book

CONTENT

• Definition and makes use of of the Petty Money E-book
• The Imprest System: – Which means, Traits and Benefits
• Preparation of the Petty Money E-book

The Petty Cash Book

That is the subsidiary ebook of account that’s used for recording low-value (petty) money funds (and occasional small money receipts). These might embrace small incidental expense similar to postages, stationery, cleansing, travelling bills and even small money funds to collectors

The petty money ebook is just like the Money E-book in that it serves the twin goal of ebook of prime entry and since it’s a part of the double entry system, additionally it is a ledger account. Sustaining a Petty Money E-book implies that it isn’t essential to document small money funds individually in both the Money E-book or the ledger. This reduces the variety of entries in these books.

The duty of sustaining a Petty Money E-book is usually given to a junior member of employees who’s given an amount of money to behave as a float from which to make small money funds. This permits the chief cashier (major cashier) to focus on extra necessary duties and in addition gives helpful coaching for a junior member of employees. The chief cashier should verify the work of the petty cashier at common intervals.

When a member of employees needs to acquire some petty money, he/she ought to current the petty cashier with a accomplished and duly authorisedpetty money voucher. This could present the aim for which the cash is required the date and the signature of the individual receiving the money. At common intervals the petty cashier ought to verify these vouchers towards the whole money spent

The Imprest System

In most organisations, the Petty Money E-book is maintained utilizing the imprest system. The imprestsytem operates when the primary cashier offers the petty cashier sufficient cash that’s ample to cowl petty bills for a given time frame e.g. per week or a month. Beneath the system, the petty cashier begins every interval (week, fortnight, month and many others.) with a hard and fast sum of money referred to as the imprest quantity or the money float. Through the interval, funds are made out of the money float and are recorded within the Petty Money E-book. On the finish of the interval, after the Petty Money E-book is balanced, the primary cashier will present the petty cashier with sufficient money to revive the stability to the quantity of imprest (money float). The petty cashier subsequently begins every interval with the identical amount of money

Beneath the imprestsystem, the primary cashier is conscious of precisely how a lot petty money has been spent in every interval. The quantity of the imprest could be adjusted as crucial whether it is an excessive amount of or not sufficient.

Features or Characteristics of the Imprest System

1. Collection of a petty cashier[mediator_tech]
2. A set sum of money (i.e the imprest quantity or money float) can be given to the petty cashier by the primary cashier
3. The petty cashier pays the assorted petty money disbursement towards duly authorised petty money vouchers.
4. The primary cashier reimburses the petty cashier with the whole quantity paid for the interval thereby restoring the imprest to its authentic determine.

Benefits of the Imprest System

1. The burden of the primary cashier can be vastly diminished
2. It serves as coaching for younger account clerks
3. It ensures accountability for each expenditure since all bills are supported by documentary evidences
4. It helps to eradicate/discourage fraudulent practices
5. It reveals extravagance and gadgets of expenditure that over-shoots the budgeted quantities
6. The totals of every merchandise of expenditure can be utilized as a foundation for making price management selections
7. Legal responsibility of the petty cashier can by no means exceed the imprest quantity
8. It relives the primary Money E-book and the final ledger accounts of entries of numerous small (insignificant) gadgets
9. The primary cashier can train appreciable management in that the imprest system is topic to verify at any time, for the money then in hand of the petty cashier plus the quantity spent within the interval in line with the vouchers ought to at all times equal the money float
10. Loses by way of the petty cashier could be minimized

The Structure of a Petty Money E-book

A Petty Money E-book resembles a ledger account with a number of cash columns on the credit score facet. These are referred to as evaluation columns and are used to divide the funds into completely different classes. A column is used for every of the primary kinds of bills paid out of petty money. As an alternative of a folio column on the credit score facet there’s a column for recording the variety of the voucher to which the cost relates.

The variety of columns and the primary kinds of bills can be decided by every particular person enterprise. In examinations, steering is given relating to the columns required.

A structure of a Petty Money E-book is proven as follows:

PETTY CASH BOOK

Date	Particulars	F	Complete acquired	Date	Particulars	Complete paid	Voucher quantity	Transport	Cleansing	Postage	Ledger
			N			N		N	N	N	N

EVALUATION

1. Record 5 options of the ImprestSystem
2. State seven benefits of preserving the Petty Money E-book on the imprest system

Preparation of the petty money ebook

1. Through the interval
2. Cash acquired or Steadiness introduced down
3. Debit the whole acquired column with any cash acquired from the primary cashier (or the stability introduced down from the earlier interval).

Insert the phrase ‘money’ or ‘financial institution’ or ‘stability b/d’ within the particulars column as acceptable.

1. Debit the whole acquired column with any cash acquired from every other supply. Insert the title of the account to be credited within the particulars column e.g. the title of a debtor (the place a debtor pays an account in money), journey bills (the place an worker reimburses the petty money for personal journey bills) phone bills (the place an worker reimburses the petty money for personal phone calls), and so forth.
2. Cash Paid

Credit score the whole paid column with any cash paid out and in addition enter the quantity within the evaluation column for that individual expense. A short description of the explanation for the cost ought to be entered within the particulars column.

1. On the finish of the interval
2. Add the whole paid column. Insert the whole
3. Add every of the evaluation columns and insert the totals. If these totals are then added horizontally, they need to agree with the whole paid column. The evaluation column are actually full.
4. Steadiness the whole acquired column and the whole paid column in the identical means as balancing every other ledger account. Carry down the stability from the credit score facet to the debit facet to start out the brand new interval.
5. When the imprest is restored enter as described earlier
6. Full the double entry for the totals of the evaluation columns
7. The totals of the evaluation columns for every expense ought to be debited to the related expense account within the basic (or nominal) ledger. To point that the double entry has been accomplished the folio variety of the related expense account is usually written under the whole of the suitable evaluation column within the petty money ebook.

NB. The tip column of the Petty Money E-book has been chosen as a ledger column. On this column, gadgets paid out of petty money which want posting to a ledger apart from the final ledger are proven. This could occur if a purchases ledger account was settled out of petty money or if a refund was made out of the petty money to a buyer who had overpaid his account.[mediator_tech]

To finish the double entry for gadgets within the ledger column within the Petty Money E-book, the purchases ledger account of the creditor ought to be debited (or the gross sales ledger account of the shopper (debtor) ought to be debited) as defined above.

Illustration

L.Mahmoud retains an analysedpetty money ebook utilizing the imprest system. The quantity of the imprest is N1,500. She offered the next data for the month of Could 2017.

Could 1 Acquired from the cashier N1, 500 as petty money float

5 Paid window cleaner N100

8 Purchased pen and pencils N40

14 Paid H. Adamu, a creditor N200

17 Paid taxi fare N90

21 Purchased pc paper N70

25 Paid bus fares N30

27 Paid A. Shuwa, a creditor N340

30 Paid workplace cleaner N350

Required

1. Put together Mahmoud’s Petty Money E-book for the month of Could 2017.

The Petty Money E-book ought to have 4 evaluation columns – cleansing, stationery, journey bills and ledger accounts

1. Steadiness the Petty Money E-book on 31^st Could 2017 and carry down the stability. Present the restoration of the imprest on 1^st June 2017
2. Make the mandatory entries in Mahmoud’s nominal (basic) ledger and purchases ledger on 31^st Could, 2017

L. Mahmoud:

PETTY CASH BOOK

Date	Particulars	F	Complete acquired	Date	Particulars	Voucher Num	Complete paid	Cleansing	Stat	Journey Expense	Ledger Accounts
2017			N	2017			N	N	N	N	N
Could 1	Money	CB	1, 500	“ 5	Window cleaner		100	100
				“ 8	Pens & Pencils		40		40
				“ 14	H. Adamu		200				200
				“ 17	Taxi fare		90			90
				“ 21	Pc paper		70		70
				“ 25	Bus fares		30			30
				“ 27	A. Shuwa		340				340
				“ 30	Workplace cleaner		350	350
							1,220	450	110	120	540
				“ 31	Steadiness	c/d	280	nl 11	nl 13	nl 19
			1,500				1,500
Jun1	Steadiness	b/d	280
“ 1	Money	CB	1,220

NOMINAL LEDGER

Cleansing Web page 11

2017 N 2017 N

Could 31 Petty money 450

Stationery Web page 13

2017 N 2017 N

Could 31 Petty money 110

Journey Bills Web page 19

2017 N 2017 N

Could 31 Petty money 120

PURCHASES LEDGER

H. Adamu Web page 31

2017 N 2017 N

Could 14 Petty money 200[mediator_tech]

A. Shuwa Web page 19

2017 N 2017 N

Could 27 Petty Money 340

NB: The Petty Money E-book is a double entry ebook and have to be included within the Trial Steadiness. The utmost stage of money held within the petty money ebook is fastened and the cashier have to be reimbursed for the quantity he has paid out. The supply doc for recordings within the Petty Money E-book are the receipts, cheques and Petty money vouchers duly authorised by the designated officers.

EVALUATION

1. Enterprise Accouting 1. Train 21.1 and 24.4A
2. Simplified and Amplified Monetary Accounting Train 5x, 6x, 7x

READING ASSIGNMENT

1. Simplified and Amplified Monetary Accounting Web page 81-88
2. Enterprise Accounting 1 Web page 226 – 231

GENERAL EVALUATION QUESTIONS

1. State 4 options of the Petty Money E-book
2. Record 5 supply paperwork which might be utilized in getting ready the Petty money E-book.
3. Clarify the operation of the Imprest System of preserving document of petty money transactions.
4. State 5 benefits of utilizing the Imprestsystem to maintain petty money data
5. Record ten makes use of of the Basic Journal

WEEKEND ASSIGNMENT

1. Which of the next demonstrates the imprest system A. float bills paid money at financial institution float B. float money from financial institution bills paid float C. float bills paid money from financial institution float D. float money in financial institution bills paid float
2. A money ebook had opening stability of N15, 200, closing stability N18, 400 and complete money acquired in the course of the interval N36, 000. What was the amount of money paid out throughout the identical interval A. N17, 800 B. N19, 600 C. N29, 200 D. N32, 800
3. In a petty money ebook, the closing stability was N235, imprestN1, 250, whereas stationery bills have been N655. How a lot was paid for different basic bills N360 B. N355 C. N350 D. N305
4. An analytical money ebook is used to A. point out sources of money acquired B. categorise petty money cost C. separate money and financial institution stability D. analyse quantity due from debtors
5. The utmost stage of money held by a cashier underneath an imprest system is a/an A. vote B. float C. reimbursement D. advance

THEORY

1. (a) What are books of prime entry

(b) Record any 5 books of prime entry

1. Clarify the next
2. Petty Money E-book
3. Imprest System