Preparing the Petty Cash Book
Imprest system
A petty cash float (say £200) is held by a petty cashier. Every payment is supported by a petty cash voucher signed by the recipient and properly authorised. At the period end the vouchers are totalled, analysed into columns (postage, travel, stationery, cleaning) and posted to the nominal ledger. The petty cashier is then reimbursed the exact amount spent, restoring the float to £200. This is the imprest system: the float is constant, and cash on hand plus vouchers should always equal the imprest.
Records
The petty cash book is a book of prime entry with analysis columns; the totals of each column, not each individual item, are posted to the ledger accounts. A petty cash control account in the nominal ledger mirrors the float. VAT may be recorded where valid receipts support it. Authorisation limits should be set so large payments go through the main bank system.
Traps
The reimbursement is the total spent, not the float itself. Do not restore the float by guessing; calculate cash spent from the vouchers. An IOU is not a valid voucher until it is properly supported. If the cash count plus vouchers does not equal the imprest, there is a shortage or surplus to investigate. Confusing analysis columns with ledger postings is a common error - only column totals are posted.
Worked example
Float £200. Vouchers: postage £30, travel £45, stationery £25, total £100. Cash in the tin should be £100. Reimbursement of £100 brings cash back to £200. Post £30, £45 and £25 to the respective expense accounts.
Rule of thumb
Cash in hand + valid vouchers = imprest at all times.