Book-keeping · Lesson 5

Petty cash book, imprest system, vouchers, analysis columns, posting

WAECNECO

What the syllabus asks

WAEC: (1) meaning, imprest system and analysis columns; (2) posting of transactions. Extends fa5.6–5.7.

NECO: (1) meaning, imprest system and analysis columns; (2) posting of transactions. Extends fa5.6–5.7.

What you will learn

Explain the meaning and purposes of the petty cash book.
Explain the imprest system, its advantages and disadvantages.
Describe the petty cash voucher and controls over petty cash.
Choose and use analysis and ledger columns.
Write up, balance and restore an analysed petty cash book.
Post the petty cash book to the ledger.
Record imprest and reimbursement in the main cash book.
Distinguish imprest from non-imprest systems.

Key points

Petty cash handles small, frequent payments.
A junior petty cashier keeps it, relieving the chief cashier.
Imprest: a fixed float topped up by the amount spent.
Cash + vouchers = imprest at any check.
Vouchers are numbered, authorised and supported by receipts.
Analysis columns group expenses; the ledger column covers persons.
Cross-cast the columns against the total.
Reimbursement is credited in the main cash book.
Column totals are debited to expense accounts.
Petty cash balance is a current asset.

Start here: Meaning and purpose of the petty cash book

Every office has small, frequent payments: stamps, keke fares to the bank, bread and tea for visitors, a ₦1,500 photocopy, a bucket of detergent. If each passed through the main cashier and the main cash book, the cash book would be crowded with tiny items and the cashier would be interrupted all day. The solution is the petty cash book.

The petty cash book is a book of original entry in which small cash payments are recorded by a junior officer, the petty cashier, out of a sum of money advanced by the main cashier. “Petty” means small.

Purposes

To relieve the main cash book of many small items.
To relieve the chief cashier of small, frequent payments, so he can concentrate on large ones.
To train a junior member of staff in handling money and records.
To group small expenses by type (analysis columns), so only column totals are posted to the ledger.
To control small spending through vouchers, limits and a fixed float.

Like the cash book, the petty cash book can be both a book of original entry and a ledger account (the Petty Cash account). Many businesses keep a Petty cash account in the general ledger as well; either way, the double entry is completed by posting the column totals.

Worked example 5.1

Explain why Ola & Sons Ltd, a clearing agent at Apapa, should not pay ₦1,500 keke fares from the main cash book.

Solution. It would add hundreds of tiny entries to the main cash book every month, interrupt the chief cashier, and give the ledger many small postings. The petty cash book collects them and posts one total for travelling expenses.

Who uses the petty cash book?

The petty cash book is kept by a junior clerk, often called the petty cashier, under the supervision of the chief cashier or accountant. In a school it may be the bursar’s assistant; in a hospital, the ward clerk; in a law firm, the office secretary. The chief cashier remains responsible: he sets the imprest, approves the vouchers and checks the book at every reimbursement. This arrangement is a good example of delegation with control: routine work is passed down, but the senior officer can still check it quickly because of the imprest rule.

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Practice questions

1. Under the imprest system, the petty cashier is reimbursed

the amount spent in the period
a fixed sum regardless of spending
half the imprest
nothing

Show answer

A: the amount spent in the period
Restores the float.

2. Imprest ₦50,000; spent ₦41,800. The reimbursement is

₦50,000
₦8,200
₦91,800
₦41,800

Show answer

D: ₦41,800
Equal to spending.

3. Imprest ₦50,000; spent ₦41,800. Cash in hand before reimbursement is

₦50,000
₦91,800
₦8,200
₦41,800

Show answer

C: ₦8,200
50,000 − 41,800.

4. Imprest raised from ₦50,000 to ₦60,000; spending ₦41,800. Amount given is

₦10,000
₦51,800
₦41,800
₦60,000

Show answer

B: ₦51,800
41,800 + 10,000.

5. A payment to a creditor from petty cash goes in the

ledger column
postage column
travelling column
cleaning column

Show answer

A: ledger column
Posted to the personal account.

Key words

Petty cash: Small amount of cash for minor payments.
Petty cashier: Junior officer who keeps petty cash.
Imprest: Fixed float restored each period.
Reimbursement: Amount given to restore the imprest.
Petty cash voucher: Signed source document for a petty payment.
Analysis column: Column grouping payments of one type.
Ledger column: Column for payments to personal accounts.
Cross-cast: Checking analysis totals add to the total column.
Float: Sum of cash held for payments or change.
IOU: Written promise to repay a cash loan.
Authorisation: Approval of a payment by a superior.
Surprise count: Unannounced check of cash and vouchers.

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