THE CATHOLIC UNIVERSITY OF EASTERN AFRICA

FACULTY OF LAW

DIPLOMA IN LAW

COURSE TITLE: FUNDAMENTALS OF BOOK KEEPING AND ACCOUNTING

LECTURER NAME: MR JARED MOSOTI

ADMISSION NUMBER:1052060

NAME: BARLIN LUKALISHI MUTEYO

COURSE CODE: DCLS 087

Write notes on petty cash (10 marks)

Petty cash is a relatively small amount of cash on hand available for employees of a business to make
small, non-recurring purchases easily and quickly. It is basically a small amount of money or cash set
aside kept on the company’s premises to pay for minor cash needs. Petty cash is used to make small
payments with notes and coins.

Petty cash payments should be for small expenses. Typically expenses to petty cash include traveling,
emergency, stationary, and stamps.

Different organizations have different rules about what can be paid out of petty cash and the amount of
petty cash kept in business.

Payments out of petty cash for expenses are made to employees to reimburse them for money spent out of
their own pocket on company affairs or they may be paid directly to the supplier.

In an organization there are three personnel who take care of the petty cash transaction:

1) Cashier who prepares the petty cash voucher and receipt. (who prepares)
2) Authorizer. The approver who belongs to the higher management. (who approves)
3) Receiver, the claimant, for proper petty cash fund implementation. (who claims)

Advantages of petty cash book

i. It is the quickest, simplest and easiest way to recover small impromptu expenses.
ii. Immediately accessible.

Disadvantages

i. Security risk; Cash is hard to secure and impossible to track it's very easy for bills to disappear
without a trace even if you have established a careful system of receipts and vouchers.
ii. Requires manual monitoring; involves extra work for someone.
iii. It is outdated; commercial transactions are increasingly becoming cashless.

Petty cash book

It is used to record petty cash expenditures that are sorted by date. It is a part of the manual record-
keeping system in the accounting department.

Functions

a) Systematic maintenance of all petty payments.

 b) Quick access to details on petty payments done by different employees.
c) An effective way to compare petty expenses over a given time frame.
d) Relieves the head cashiers, enabling them to focus on significant business transactions.
e) Enhanced division of labor in keeping track of all business transactions.
f) Improves employee accountability on business resources

Format of a petty cash book

COMPANY’S NAME

DR PETTY CASH BOOK CR

RECEIPTS FOLIO DATE PARTICUL VOUCHER TOTAL EXPENSES

ARS NO

The balance c/d of the petty cash book will signify the balance of cash in hand or form of cash in hand.
The totals of the expenses are posted on the debit side of the expense account. If a firm operates another
cash book in addition to the petty cash book then the totals of the expenses will also be posted on the
credit side of the cash-in-hand cash book.

A petty cash book operates in three systems:

i. Ordinary/open cash system

ii. Fixed system
iii. Imprest cash system

Ordinary/open cash system

It is a technique in which the principal cashier gives the petty cashier a lump sum of money to pay for the
organization's little day to day costs. When the petty cashier receives the cash, they will spend it all and
deliver the expenditure report to the principal cashier who will evaluate it before approving any extra
funds.

Advantages

I. It is appropriate for small firms with only one petty cashier and one major cashier.
II. It is simple to manage since it does not need much balancing of the amount spent and the sum
supplemented by the main cashier to keep a cash float.
III. The personnel dealing with petty cash have a low risk of losing money through cooperation and
each can oversee every cash transfer.
IV. It is less cost-effective and takes less time since the transactions required are few compared to
large enterprises.
Disadvantages
i. Duplication of primary cashier duties. I the supervisor is not attentive, the main cashier’s
assignments will be identical to petty cashier’s tasks because the number of transactions is
minimal and only one cashier is required.
ii. There is a high probability of cash misappropriation, especially if a few cashiers conspire due to
lack of division of duties.

Fixed cash system

A predetermined sum is supplied to the petty cashier for a specified length of time under the fixed
system of petty cash. The petty cashier presents the details of petty expenses at the end of the
specified period ,and the chief cashiers advances a fixed sum for the following fixed period.

Imprest system of cash book

It refers to the general ledger account. Petty cash is to be kept dormant at a consistent value. This
method uses a float (The money supplied by the main cashier)to be kept at the end of a certain
timeframe. It entails assigning a particular quantity of cash to the petty cashier for usage within a
particular period, after the petty cashier has utilized the money supplied, the report is handed to the
main cashier who reimburses the petty cashier to verify the original cash ranted earlier is restored as
stipulated (a float). As a result, the amount b/d (debit balance) in the petty cash book under the
imprest method is the same at the start of each month.

Advantages

a) Under this approach, the chief cashier reviews the petty cash recorded regularly, and any
errors made by the petty cashier are quickly recognized and fixed by the main cashier.
b) Enhances financial management performance and improved cash system enables appropriate
cash handling since there is structure and no erroneous transactions. The petty cashier is
solely responsible for handling a specific quantity of cash.
c) It is a mechanism that reduces the possibility of misappropriating money.
Disadvantages
1) Costly since it demands skilled cash employees.
 2) Too cash demanding because a specific amount of cash float must be retained throughout
some cash may be moved from a better investment to compensate for the missing deficit in
the float.
3) Larger expenses are inconvenient, creating a hassle for greater costs. It is compatible and
convenient for lower costs; the reverse is true for higher expenses.
4) Accounting mistakes Because there is no secondary documentation mechanism to monitor
nominal cash expenses accounting mistakes in the petty cash system are unavoidable.
NOTE:
 The petty cash book is a double-entry book and must be included in the trial
balance, The maximum level of cash held in the petty cash book is fixed and the
cashier must be reimbursed for the amount the amount he has paid out. The source
documents for recordings in the petty cash book are receipts, cheques, and petty
cash vouchers duly authorized by the designated officers.

Petty cash is a is a current asset and should be listed as a debit on the company balance sheet. The journal
entry on the balance sheet should list a debit to the business bank account and a credit on the petty cash
account.

A receipt slip should be filled out of any money taken and should list the date exact amount of cash
description of the expense and the name and signature of the individual receiving the cash.

The accountant should write a cheque made out of petty cash for the amount of the expenses paid for with
the petty cash that month to bring the account back to the original amount. The reconciliation process
ensures that the funds remaining balance equals the difference between the original balance minus
charges detailed on the receipt and invoices if the remaining balance is less than what it should be there is
a shortage and if it's more there is an overage.

Types of petty cash books

There are two types of petty cash books;

1) Simple petty cash book

2) Analytical petty cash book

1)Simple petty cash book

This is just like the main cash book. Cash received by the petty cashier is recorded on the debit side and
all payments for petty expenses are recorded on the credit side in one column.
FORMAT

Cash received Folio Date Particulars V.N Total

Payments

This is just like the main cash book. Cash received by the petty cashier is recorded
on the debit side, and all payments for petty expenses are recorded on the credit
side in one column
2)Analytical petty cash book

This is the most effective way to record petty cash payments. A separate column is assigned on the credit
side. Whenever a petty expense is recorded in the total payment column the same amount is recorded in
the relevant petty expense column.

FORMAT

Cash Folio Date Particulars V.N Total Analysis of

received payment expenses

Although most businesses keep both the main cash book and petty cash book there are differences which
include;

Petty Cash book Cash book

Maintained by petty cashier
There are more than three columns for the number
of columns are the number of expenses.
No discount is allowed and discount received
transactions are recorded here.
Maintained by the main cashier
Has a maximum of three columns for a column
cash book.
Discounts allowed and discount received are
recorded.
This is just like the main cash
book. Cash received by the
petty cashier is recorded
on the debit side, and all
payments for petty expenses are
recorded on the credit
side in one column
This is just like the main cash
book. Cash received by the
petty cashier is recorded
on the debit side, and all
payments for petty expenses are
recorded on the credit
side in one column
This is just like the main cash
book. Cash received by the
petty cashier is recorded
on the debit side, and all
payments for petty expenses are
recorded on the credit
side in one column
This is just like the main cash
book. Cash received by the
petty cashier is recorded
on the debit side, and all
payments for petty expenses are
recorded on the credit
side in one columnThis is just
like the main cash book. Cash
received by the petty cashier is
recorded on the debit side, and
all payments for petty expenses
are recorded on the credit side
in one column
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
PETTY CASH
Petty cash is a relatively small
amount of cash on hand
available for employees of a
business to make small, non-
recurring purchases easily and
quickly.
In other words, petty cash is a
small amount of cash that is
kept on the company’s
premises to pay for minor cash
needs. Examples of these
payments are office
supplies.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
1

Companies keep the small

amount of cash in the office
under the control of a
cashier, who keeps a check on
each cash transaction for correct
entries and
appropriate recordkeeping.
Expenditures such as day-to-
day snacks, tea for employees,
employee
reimbursements for occasional
traveling, small bank charges,
like notary, greetings
or sweets to clients or
customers on festivals or special
occasions are all paid
through a petty fund.
PETTY CASH
Petty cash is a relatively small
amount of cash on hand
available for employees of a
business to make small, non-
recurring purchases easily and
quickly.
In other words, petty cash is a
small amount of cash that is
kept on the company’s
premises to pay for minor cash
needs. Examples of these
payments are office
supplies.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
1

Companies keep the small

amount of cash in the office
under the control of a
cashier, who keeps a check on
each cash transaction for correct
entries and
appropriate recordkeeping.
Expenditures such as day-to-
day snacks, tea for employees,
employee
reimbursements for occasional
traveling, small bank charges,
like notary, greetings
or sweets to clients or
customers on festivals or special
occasions are all paid
through a petty fund.
PETTY CASH
Petty cash is a relatively small
amount of cash on hand
available for employees of a
business to make small, non-
recurring purchases easily and
quickly.
In other words, petty cash is a
small amount of cash that is
kept on the company’s
premises to pay for minor cash
needs. Examples of these
payments are office
supplies.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
1

Companies keep the small

amount of cash in the office
under the control of a
cashier, who keeps a check on
each cash transaction for correct
entries and
appropriate recordkeeping.
Expenditures such as day-to-
day snacks, tea for employees,
employee
reimbursements for occasional
traveling, small bank charges,
like notary, greetings
or sweets to clients or
customers on festivals or special
occasions are all paid
through a petty fund.
PETTY CASH
Petty cash is a relatively small
amount of cash on hand
available for employees of a
business to make small, non-
recurring purchases easily and
quickly.
In other words, petty cash is a
small amount of cash that is
kept on the company’s
premises to pay for minor cash
needs. Examples of these
payments are office
supplies.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
1

Companies keep the small

amount of cash in the office
under the control of a
cashier, who keeps a check on
each cash transaction for correct
entries and
appropriate recordkeeping.
Expenditures such as day-to-
day snacks, tea for employees,
employee
reimbursements for occasional
traveling, small bank charges,
like notary, greetings
or sweets to clients or
customers on festivals or special
occasions are all paid
through a petty fund.
PETTY CASH
Petty cash is a relatively small
amount of cash on hand
available for employees of a
business to make small, non-
recurring purchases easily and
quickly.
In other words, petty cash is a
small amount of cash that is
kept on the company’s
premises to pay for minor cash
needs. Examples of these
payments are office
supplies.
Therefore, petty cash is the best
alternative of payment in
situations where paying by
check seems an insensible
option.
In an organization, there are
three personnel who take care
of the whole petty
money transaction flow:
1. Cashier – who prepares the
petty cash voucher and receipt.
2. Authorizer – approver, who
belongs to the higher
management.
3. Receiver – the claimant; for
proper petty fund transaction
implementation.
1

Companies keep the small

amount of cash in the office
under the control of a
cashier, who keeps a check on
each cash transaction for correct
entries and
appropriate recordkeeping.
Expenditures such as day-to-
day snacks, tea for employees,
employee
reimbursements for occasional
traveling, small bank charges,
like notary, greetings
or sweets to clients or
customers on festivals or special
occasions are all paid
through a petty fund.
This is just like the main cash
book. Cash received by the
petty cashier is recorded
on the debit side, and all
payments for petty expenses are
recorded on the credit
side in one column
This is just like the main cash
book. Cash received by the
petty cashier is recorded
on the debit side, and all
payments for petty expenses are
recorded on the credit
side in one column
This is just like the main cash
book. Cash received by the
petty cashier is recorded
on the debit side, and all
payments for petty expenses are
recorded on the credit
side in one columnThis is just
like the main cash book. Cash
received by the petty cashier is
recorded on the debit side, and
all payments for petty expenses
are recorded on the credit side
in one column