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Chapter 3

3.5 Petty cash book

The business entity will record small cash transactions (‘notes and coins’) in a
separate book of prime entry, the petty cash book. Individual cash receipts and
payments will be recorded and analysed in a similar manner to the cash book.

Many business entities use an imprest system to account for and control petty cash
transactions and balances. An amount is withdrawn from the bank account which is
referred to as ‘a petty cash float’. The ‘float’ is then used to pay for various sundry
expenses. Any expenditure must be evidenced by an expense receipt or voucher. At
any point in time the cash balance, together with the expense vouchers, should
agree to the total of the float. Periodically, the cash balance will be replenished to the
predetermined amount to reimburse amounts paid out.

Tutor notes guidance – discussion points

Draw a mock-up of a petty cash book to show the topping up of the float to

demonstrate how the imprest system works.

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