Business Studies

What is a Petty cash book

This is used to record small expenses such as postage stamps, envelops, transport fares, newspapers, stationery and other small items needed in the office. The word ‘petty’ means small. We cannot pay for them with cheques because they are too small. It is also a book of original entry and also a ledger account for petty cash. The cost of each of the small items is recorded in the petty cash book instead of the ledger. The total expenses are transferred to the ledger as a petty cash account.

Columns in a Petty Cash Book


  1. Amount
  2. Date
  3. Particulars of expenses
  4. Voucher number
  5. Total amount


On the credit side we have the analysis of expenses of a ledger account. This has different columns for different expenses e.g. stationery, postage, transport, etc.

Recording of Receipts and Payments in Petty Cash Book

  1. The credit entry is made in the cash book
  2. The debt entry is made in the petty cash book
  3. The entries on the credit side of the petty cash book are first made in the total column and then, extended into the relevant expenses column,
  4. The expenses columns have various headings for different expenses,
  5. The last column of the petty cash book is known as a ledger account.

Preparation of a Petty Cash Book


Record the following in the relevant columns of the petty cash book of Chillington, a sole proprietor.

Jan 1Petty cashier received an Imprest amount of₦2000
2Paid for bus fare₦200
4Paid for postage₦150
8Paid for duplicating paper₦300
12Bought envelops₦250
16Paid Mr. Kalu₦500
25Bought office pins₦100
26Bought stamps₦100
30Paid taxi fare₦200

Chillington’s Petty Cash Book

Amount ReceivedDateParticularsVoucher
Analysis of
2,000Jan 1
2Bus fare1200200
16Mr. Kalu5500
25Office Pins6100100
30Taxi fare18200200
31 Balance c/d200300300400100500
200Feb 1Balance c/d

Imprest System

This is a method used in controlling the amount of money to the petty cashier. A fixed amount called Imprest is given to the cashier weekly or monthly to pay for small expenses.

At the end of the period, the petty cashier gives account of what she spends and the balance remaining. The amount spent will be reimbursed. This process of giving a petty cashier some amount of money for petty items at the beginning of every month is called “Imprest system”.

Imprest System: This is an effective way of making money available for minor expenses and keeping accurate records in the petty cash book

The sum of money giving to a petty cashier is called “Cash float”. Also, the document used in raising petty cash is known as a “Petty Cash Voucher”

Petty Cash

Petty means small.

This is a small amount of money given , that is used for making immediate payments for small expenses. The petty cash is managed by an assigned person known as the petty cashier.


This involves giving the petty cashier more money at regular intervals to cover the amount so far spent. Reimbursement is meant to maintain the level of the float.


This is the process of returning the amount of money not spent after the actual money has been spent on a specific item. For example, account issue out/give out N10000 and out of this money, N8000 was spent on a particular item. The remaining N2000 which is not spent will be returned back to the accountant which is called retirement.

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