Acca f3 Financial Accounting (int) Study Text

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4: Sources, records and books of prime entry   Part C  The use of double entry and accounting systems 

5.3 The petty cash book 

A

petty cash book is a cash book for small payments. 

Although the amounts involved are small, petty cash transactions still need to be recorded; otherwise the 

cash float could be abused for personal expenses or even stolen. 

There are usually more payments than receipts, and petty cash must be 'topped up' from time to time with 

cash from the business bank account. A typical layout follows. 

PETTY CASH BOOK 

Receipts Date  Narrative 

Total 

Milk  Postage  Travel  Other 

$ 

20X7 

 

$ $ $ $ $ 

250 

1 

Sept 

Bal 

b/d 

     

  

Milk 

bill 

25 

25 

 

 

 

 

 Postage 

stamps  5  5   

  

Taxi 

fare 

10 

 

 

10 

 

 

 

Flowers for sick staff 

15 

 

 

 

15 

  

Bal 

c/d 

195

 

    

     

    

250

250

25

5

10

15

5.4 Imprest system 

Under what is called the 

imprest system, the amount of money in petty cash is kept at an agreed sum or 

'float' (say $250). This is called the 

imprest amount. Expense items are recorded on vouchers as they 

occur, so that at any time: 

$

Cash still held in petty cash

195

Plus voucher payments (25+5+10+15) 

55

Must equal the imprest amount

250

The total float is made up regularly (to $250, or whatever the imprest amount is) by means of a cash 

payment from the bank account into petty cash. The amount of the 'top-up' into petty cash will be the total 

of the voucher payments since the previous top-up. 

The

imprest system makes a refund of the total paid out in a period. 

The June 2008 exam included a question asking students to calculate the imprest amount. Many students 

didn’t read the question carefully enough and so arrived at a wrong answer. Make sure that you follow the 

example below, which demonstrates the correct technique. 

5.5 Example: petty cash and the imprest system 

DEF operates an imprest system for petty cash. During February 20X9, the following petty cash 

transactions took place. 

$

2.2.X9 Stamps 

12.00

3.2.X9 Milk 

25.00

8.2.X9 Taxi 

fare 

15.00

17.2.X9 Stamps 

5.00

18.2.X9 

Received from staff for photocopying 

8.00

28.2.X9 Stationery 

7.50

Key term 

Key term 

Exam focus 

point

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Part C  The use of double entry and accounting systems

  4:  Sources, records and books of prime entry

67

The amount remaining in petty cash at the end of the month was $93.50. What is the imprest amount? 

A $166.00 

B $150.00 

C $72.50 

D $56.50 

The solution is B. 

$

Opening balance (imprest amount)

150.00

(balancing figure)

Add: amount received from staff

    8.00

158.00

Less: expenditure

(64.50)

(12 + 25 + 15 + 5 + 7.50)

Cash in hand at end of month

93.50

Question

Books of prime entry 

State which books of prime entry the following transactions would be entered into. 

(a) 

Your business pays A Brown (a supplier) $450.00. 

(b) 

You send D Smith (a customer) an invoice for $650. 

(c) 

Your accounts manager asks you for $12 urgently in order to buy some envelopes. 

(d) 

You receive an invoice from A Brown for $300. 

(e) 

You pay D Smith $500. 

(f) 

F Jones (a customer) returns goods to the value of $250. 

(g) 

You return goods to J Green to the value of $504. 

(h) 

F Jones pays you $500. 

Answer

(a) Cash 

book 

(b) 

Sales day book 

(c) Petty 

cash 

book 

(d) Purchases 

day 

book 

(e) Cash 

book 

(f) 

Sales returns day book 

(g) 

Purchase returns day book 

(h) Cash 

book 

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4: Sources, records and books of prime entry   Part C  The use of double entry and accounting systems 

Chapter Roundup 

 

Business transactions are recorded on 

source documents. Examples include sales and purchase orders, 

invoices and credit notes. 

 The 

main 

books of prime entry are as follows. 

 

– 

Sales day book 

 

– 

Purchase day book 

 

– 

Sales returns day book 

 

– 

Purchase returns day book 

 

– 

Journal (described in the next chapter) 

 – Cash 

book 

 

– 

Petty cash book 

 

Invoices and credit notes are recorded in 

day books.

 The 

cash book may be a manual record or a computer file. It records all transactions that go through the 

bank account. 

 

Most businesses keep 

petty cash on the premises which is topped up from the main bank account. Under 

the

imprest system the petty cash is kept at an agreed sum so that each topping up is equal to the amount 

paid out in the period. 

Quick Quiz 

1 

Name four pieces of information normally shown on an invoice.  

2 

Which of the following is not a book of prime entry. 

A Sales 

invoice 

B 

Purchase day book 

C 

Sales day book 

D Journal 

3 

Which of the following is a source document for petty cash. 

A Purchase 

invoice 

B Quotation 

C Sales 

invoice 

D 

Receipt and claim form 

4 

What is the purchase returns day book used to record? 

 A Supplier's 

invoices 

 B Customer's 

invoices 

 

C 

Details of goods returned to suppliers 

 

D 

Details of goods returned by customers 

5 

What is the difference between the cash book and the petty cash book?  

6 

Petty cash is controlled under an imprest system. The imprest amount is $100. During a period, payments 

totalling $53 have been made. How much needs to be reimbursed at the end of the period to restore petty 

cash to the imprest account? 

 A $100 

 B $53 

 C $47 

 D 

$50 

7 

All petty cash claims are automatically paid from petty cash. 

Is this statement: 

A True 

B False 

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