The imprest system gives a petty cashier a fixed float for small expenses, and at the end of each period the main cash book restores that float by the exact amount spent. The payments are written in a petty cash book with analysis columns, so each expense type can be totalled and posted to the ledger.
This appears when a question lists petty cash vouchers and asks you to write up the book and show the restoring payment. It belongs to cash books and petty cash.
How does the imprest system work?
The float is set at the start, for example RM 300. Each small payment is supported by a voucher. The cashier records it in the petty cash book on the credit side (the payments side) in the total column and in the matching analysis column.
At the end of the period, the payments are totalled. The main cashier gives the petty cashier the same amount, so the float is back to RM 300.
How do you write up the petty cash book?
- Debit side: record the opening float, and later the amount received to restore it.
- Credit side: record each payment in the total column and in one analysis column.
- Total each analysis column, then add the column totals across to check they equal the total column. This is called a cross-cast.
- Balance the book: the balance carried down equals the float, if the restoring amount has been received.
Worked example
Harmoni Dental Supplies holds a petty cash float of RM 300, received on 1 September. The payments in September are:
| Date | Voucher | Item | Amount RM | Type |
|---|---|---|---|---|
| 2 Sep | 1 | Stamps | 24 | Postage |
| 4 Sep | 2 | Taxi fare | 38 | Travel |
| 7 Sep | 3 | Cleaning materials | 46 | Cleaning |
| 11 Sep | 4 | Tea and coffee | 27 | Sundry |
| 15 Sep | 5 | Parcel postage | 35 | Postage |
| 19 Sep | 6 | Bus fare | 19 | Travel |
| 24 Sep | 7 | Window cleaner | 55 | Cleaning |
| 28 Sep | 8 | Notepads and pens | 30 | Sundry |
Step 1, total each analysis column. Postage 24 + 35 = 59. Travel 38 + 19 = 57. Cleaning 46 + 55 = 101. Sundry 27 + 30 = 57.
Step 2, cross-cast. 59 + 57 + 101 + 57 = 274. Adding the total column gives 24 + 38 + 46 + 27 + 35 + 19 + 55 + 30 = 274. They agree.
Step 3, find the restoring amount. The float was 300, the spending was 274, so cash in hand is 300 − 274 = RM 26. The restoring payment is RM 274.
Step 4, record the restoration. The petty cash book is debited RM 274 on 30 September. The main cash book is credited RM 274 in the bank column if a cheque is drawn.
| Debit side | RM | Credit side | RM |
|---|---|---|---|
| 1 Sep Cash book (float) | 300 | September payments | 274 |
| 30 Sep Cash book (restore) | 274 | 30 Sep Balance c/d | 300 |
| 574 | 574 |
Step 5, post the column totals. Debit postage RM 59, travel RM 57, cleaning RM 101 and sundry RM 57 in the ledger. The total, RM 274, is credited through the main cash book.
The petty cash book shows a balance brought down of RM 300 on 1 October, equal to the float.
The mistake to watch for
A common slip is to restore the full float rather than the amount spent.
Mistaken entry: Cash book credited RM 300 to restore the float.
After this restoring payment, the petty cashier would hold 26 + 300 = RM 326, which is RM 26 more than the agreed float, and the main cash book would be RM 26 lower than it should be.
The correction is to subtract the cash still in hand from the float, or simply total the payments. Both give RM 274.
Check yourself
1. The float is RM 250. Payments in the month total RM 197. How much is restored, and how much cash is left before restoring?
Show answer
Restore RM 197. Cash in hand before restoring is 250 − 197 = RM 53.
2. The float is RM 500. The petty cashier counts RM 138 at the end of the month. How much was spent and how much is restored?
Show answer
Spent: 500 − 138 = RM 362. The restoring amount is RM 362.
3. A petty cash book has a total of RM 168. The analysis columns show travel RM 54 and postage RM 41, and sundry is unreadable. What is the sundry total?
Show answer
168 − 54 − 41 = RM 73. Check: 54 + 41 + 73 = 168.
Where this leads next
Petty cash is tidy because the float is fixed, and the next lesson compares the bank column with a bank statement in comparing cash-book balance with bank statement timing. The double-entry and ledger trainer can show how the column totals reach the expense accounts.
If analysis columns and restoring amounts still trip you up, our teachers can work through them in online one-to-one Accounting tuition.