CHAPTER 11

Maintaining petty cash

Contents
1 The purpose of petty cash
2 Security and control of petty cash
3 The imprest system
4 Petty cash vouchers
5 The petty cash book
6 Recording and analysing petty cash
transactions
7 Recording petty cash transactions: sales
tax
8 Topping up the float, balancing off and
Chapter scenario
The purpose of petty cash
 Payments for small items of expense

 Exam focus point: A possible MCQ might be 'Which one

of the following items would/would not be paid out of
petty cash?'
Question
Would you say that the items, amount and
recipient below are acceptable for petty
cash payments at Top Toys
Security and control of petty
cash
 The petty cash box
 Limiting the size of petty cash payments
 Authorisation and authorisation limits
 Receipts
 Salestax receipts
 No available receipts
The imprest system
Petty cash vouchers
 Prepared by
cashier when
payment is
requested
 Usually, vouchers
are numbered in
sequence for each
year, starting at 1
with the first
voucher each year
 For what?
Example
 On Monday 14 December 20X7 you receive the
following requests for reimbursement. The last voucher
used the previous week was numbered 100.
(a) The receptionist, Mrs T Scott, produces a receipt
for postage stamps purchased for office use to the
value of $6.25.
(b) The sales manager produces a receipt for $7.50
in respect of a return rail ticket, purchased in order to
visit a customer.

Task:
Using the blank petty cash vouchers provided, complete
vouchers for the above two items. Ignore sales tax.
Answer
Petty cash payments for
expenses not yet incurred
Example
Suppose that a director of company C needs
money to pay for a taxi and asks for $20.00
from petty cash on 5 July 20X7. The
payment might be sanctioned by the
accounts supervisor, T Roberts. The next
day, the director returns with a taxi cab
receipt for $15.50 and gives back change of
$4.50.
Solution

Payment in advance Voucher received

Checks on petty cash and
vouchers

What might be the reason?

(b)A mistake in the amount of cash paid out, eg
the petty cashier might have paid out $10.00
for a voucher of only $9.80, leaving a 20c
shortage of cash
(b) Theft from the petty cash box
IOUs and petty cash

 When staff borrows

cash, he or she
must put an IOU into
the petty cash box
 IOUs are equivalent
to cash
Receiving money into petty
cash
 An employee of the organisation might use some of
the office's postage stamps, to put on personal
letters. He or she will pay for the stamps by giving the
cash to the petty cashier
 Similarly, employees might be expected to pay for
any private telephone calls that they make from an
office telephone
 Very occasionally, perhaps when the petty cash float
Question
On Tuesday 15 December 20X7, you receive the
following requests for reimbursement.
(a) The new office clerk presents bus tickets for
amounts totalling $3.60 to support a request for
payment for his first week's travel to work.
(b) Ten new printer cartridges have been received
costing $5.50 each. An invoice has been sent
with the goods and a receipt will be issued on
payment.
(c) The office caretaker asks for $5 to pay as a
gratuity to the refuse collectors, as has been
customary in previous years.
(d) A clerk says that the administration manager
asked him to purchase coffee, tea and sugar for
Answer
I am not able to complete vouchers for any of
the items in this exercise.
(a) I would refuse reimbursement. The cost of
an employee's daily travel to work is not an
expense of the business.
(b) This request exceeds the $25.00 limit
applying to petty cash disbursements. I
would refuse the request: the bill will be paid
from the main bank account.
(c) No receipt will be available and the request
should therefore be referred to the
Administration Manager.
(d) The sum exceeds my $10.00 authorisation
Petty cash book

Example:
Writing up petty cash
book payments

There are four analysis

columns in the petty cash
book.
• Travel
• Postage
• Stationery
• Sundry items
Answer
Example
Here are two receipts for payments that include a tax element.
A claim from petty cash is made separately for each. How
would these be recorded as petty cash vouchers and how
would they be recorded in the petty cash book?
Answer
 Voucher
Answer
 Petty cash book
Topping up the float, balancing
off and posting petty cash
Answer
Answer

1. Cast and cross-cast columns in

petty cash book
2. Count cash and vouchers in
petty cash box
3. Calculate amount of, and
prepare, cheque requisition and
cheque
4. Specifying notes and coins
required, cash cheque at bank
and put cash in box, enter in
petty cash book
5. Balance off petty cash book
6. Check balancing off
7. Post totals to general ledger
Quiz
1 Why do organisations need petty cash?
2 Who is responsible for the safety and security of the petty
cash box?
3 What is the nature and purpose of the imprest system?
4 (a) What details are shown on petty cash vouchers?
(b) What information is usually only added to petty cash
vouchers when the petty cash book is about to be written
up?
(c) What should be attached to a petty cash voucher?
5 What items are recorded on the left-hand side of the petty
cash book? And what on the right?
6 Why might money be received into petty cash?
7 On what grounds could you ignore the sales tax element of
petty cash vouchers?
8 State the 7 steps for topping up, balancing off and posting
petty cash.
Answer
1 Because small items of expense need to be paid for out of
notes and coins.
2 The petty cashier, a 'deputy' in his or her absence.
3 The imprest system is designed to keep control of petty cash.
The imprest amount is the maximum amount in the petty
cash box
4 (a) Purpose of payment, amount paid, name and signature of
recipient, name and signature of person authorising
payment, date of payment.
(b) Voucher number
(c) Receipt
5 Receipts (debit side). Payments (credit side).
6 Payments from employees for personal use of company
property, cash sales
7 If it were company policy to do so.
QB 19
An organisation restores its petty cash balance to
$500 at the end of each month. During January,
the total column in the petty cash book was
recorded as being $420, and hence the imprest
was restored by the amount. The analysis
columns, which had been posted to the nominal
ledger, totalled only $400. This error would
result in
A No imbalance in the trial balance
B The trial balance being $20 higher on the debit
side
C The trial balance being $20 higher on the credit
side
D The petty cash balance being $20 lower than it