Chapter 5 The Cash Book

The Cashbook

This chapter will be divided into 3 sections as follows:

Cash Petty
Book Cash

The Two Column and Three Column Cash Book

……………………………………………..

Cashbook
• Cashbook is the book (Journal) use to record all cash receipts and payments
transactions in a business all the transactions are recorded by company.
• cashbook is one of the books of original entry.

the difference between two column cashbook and three column cash books

1

Details Fol Cash TWO COLUMN CASH BOOK Fol Cash Bank
Bank Date Details

THREE COLUMN CASH BOOK

Date Details Fol Discount Cash Bank Date Details Fol Discount Cash Bank

REVIEW QUESTION AND ANSWER

1.
Jenab is a trader who maintains a full set of accounting records including a three
column cash book.
Her transactions for September 2020 included the following.

2

September

5 Cash sales, RM515, of which RM400 was paid directly into the bank

10 A cheque received in August for RM190 from Chong was dishonored

15 Received a cheque from Mohd Faez to settle her debt of RM480, less
2½% cash discount

27 Paid RM324 by cheque, for new office equipment, RM280, and repairs
to existing office equipment, RM44

28 Paid all the cash into the bank except RM50

REQUIRED

(a) Complete Jenab’s cash book.

Balance the cash book and bring down the balances on 1 October 2020.

Solution:

Discount THREE COLUMN CASH BOOK Discount
Allowed Received
Details

Date Details Cash Bank Date Cash Bank

Sep- Bal b/d 193 Sep- Bal b/d 1,560
01 01

5 Sales 115 400 10 Chong (dis 190
cheque)

15 Faez 12 468 27 Office 280
equipment

28 Cash 258 Repairs 44
contra

30 Bal c/d 948 28 Bank 258
contra

30 Bal c/d 50

12 308 2,074 308 2,074
948
Oct- Bal b/d 50 Oct- Bal b/d
01 01

3

Petty Cash Book

Learning objective
After you have studied this section, you should able to :
1. Explain the purpose of the Petty Cash Book
2. Record transactions correctly in the Petty Cash Book

INTRODUCTION

Receipt and payments which are in the form of cash and cheques are recorded in
the Cash Book. In practice, for the purpose of security, cheques are used for all
receipts and payments. However, in the daily operation of the business , there are
many very small payments which do not allowed the use of cheques. We do not
use cheques to pay taxi fares and stamps. Therefore, the business needs to set aside
some cash to cater to these small payments. The cash set aside is called petty cash.
The book that is used to record these small payments is called Petty Cash Book.
Hence, this book replaces all payment in cash in the Cash Book. The original Cash
Book becomes a Bank Cash Book dealing only with payments by cheques.

Purpose of Petty Cash Book

The advantage of using a Petty Cash Book are as follows:
a) It is not practical to pay small amounts by cheques
b) It reduces the number of entries for small payments in the Cash Book
c) The job of recording small payments can be assigned to a junior clerk

4

The Imprest System

The Imprest System is a system for controlling petty cash. The person in charge of
petty cash is given an amount in advance of expenditure. This amount is called the
imprest amount of float. The float is for a specific period of time- it could be a week,
two weeks or a month. Each disbursement is paid out from the float and it must be
supported by a petty cash voucher an authorize by a responsible person. At the end
of the period, an amount equal to the total value of all the vouchers for the period
is claimed from the chief cashier so that the petty cash is restored to the initial
amount.

Example RM
Cash received by the petty cashier 150
Less: Total payment for one week 133
Petty cash in hand
Reimbursement by chief cashier 17
Petty cash in hand at the beginning of next period 133
150

The advantage of this system is that is acts as a control device. At any one time, the
total of the petty cash vouchers and money in the petty cash box must be equal to
the imprest amount. Any difference implies errors such as a mistake in pay out or
money missing from the box

Though the imprest amount is always fixed, it can be varied according to the needs
of the business. For example, if the imprest amount is to be increased to RM200, then
the amount to be paid to the petty cashier will be RM133+RM50=RM183

5

Illustration of a Columnar Petty Cash Book

Analytical columns are used in the Petty Cash Book. The number of column will
depend on the needs of the business . Items that occur more frequently may require
a column on its own. Others that are rare and quite infrequent may be grouped
under one column known as “ sundries”. Examples of such items are small cash
purchases and worker bonuses.

Fill in the blanks

RECEIP DAT PARTICULARS TOTAL PAYMENT ANALYSIS PAYMENT ANALYSIS
T E PAYMEN
RM T
POSTAGE STATION GENERAL TRAVELI SU
RM RM ERY EXPENSE NG ND
RM S RM RIE
RM S
RM

150.0 Jan Bank 8.80
1 Stamps 12.00
3 Printing
paper 20.00
4 Loan to Ali 7.00
8 Office
drinks 15.00
10 Purchases 6.00
12 Taxi fare 8.70
13 Envelope
14 Pen, pencil 10.50
15 Taxi fare 5.00
15 Office
cleaning 20.00
Office 25.00
drinks

Bal c/d

Bal b/d
Bank

6

Posting to Ledger

Postage Account

Travelling Expenses Account

Stationery Account
General Expenses Account

Loan Account
Purchases Account

To set up an imprest system, three steps are involved :
1. The imprest amount determined is given to the petty cashier

Debit Petty Cash Book

Credit Bank Account

2. Record the petty cash expenses by entering the amount of each petty cash
voucher in the appropriate analysis column and the total payment column.
Add up each analysis column for posting to the appropriate accounts at the

7

end of the period. Except for the sundries column which is to be posted
individually, the others are posted

Summary
• The petty cash cashier is given a fixed sum of money called the
float
• Small expenses are paid out from the float
• At the end of the period , the chief cashier will reimburse the
amount paid out

Model Question And Answer

Question 1

Prepare the Petty Cash Book to record the following transactions. Use the following

headings for payment analysis: Postage, Stationery, Travelling, and General

Expenses. Post to the Ledger at the end of the week.

RM

July 8 Petty cash balance 30.00

Reimbursement from chief cashier 370.00

9 Bought toner for printer 60.00

Bought lock to replace the old office lock 26.00

Paid postage for registered letters 13.00

10 Bought double-sided tape 16.00

Bought envelopes 11.00

11 Paid office cleaner 24.00

Advance to office boy 30.00

12 Paid postage for parcels 21.00

Paid taxi fare 18.00

Donation to old folks’ home 40.00

13 Donation for school walkathon 20.00

Bought sugar , tea and coffee 22.00

Bought printer cartridge 17.00

8

Solution

TOTAL PAYMENT ANALYSIS
PAYME
RECEI PARTICULARS NT
PT
D POST STAT TRAV GENE SUND
A AGE IONE ELLI RAL RIES
T RY NG EXPE
E NSES

30 Jul Balance

-
08

370 8 Reimbursement

9 Toner 60 60

9 Lock 26 26

9 Postage 13 13

10 Double sided tape 16 16

10 Envelopes 11 11

11 Office cleaner 24 24

11 Advance to office 30 30
boy 21
21
12 Postage

12 Taxi fare 18 18

12 Donation folks' 40 40

home

13 Donation to 20 20

school

13 Sugar,tea and 22 22

coffee

13 Printer cartridge 17 17

400 318
82 Balance b/d 82 45 93 18 72 90

400

318 Bank

9

Jan- Petty Postage
14 Cash Account

Jan- Petty 45
14 Cash
Stationery Account
Petty 93
Cash Travelling Account
18
Petty General
Cash
Account
Petty 162
Cash
Donation
Petty 60
Cash
Advance to
Office Boy

30

10

Chapter 5
Petty Cash Book

REVIEW EVALUATION

Question
1.

Hjh Bedah keeps her petty cash book on imprest system, the imprest being RM250.

For the month of April 2018 her petty cash transactions were as follows:

RM

Apr 1 Petty cash balance 11.30

2 Petty casher presented vouchers to cashier and 238.70

obtained cash to restore the imprest

9 Paid to Syukur , a creditor 23.50

11 Paid bus fares 17.20

17 Bought envelopes 7.00

23 Received cash for personal telephone call 6.80

26 Bought petrol 10.00

REQUIRED:

i) Prepare the Petty Cash Book to record the above transactions. Use the

following headings for payment analysis: Postage & Stationery, Travel, and

Sundries

ii) Post to the Ledger at the end of the month.

2.
Prepare the Petty Cash Book with appropriate analytical columns to record the

following particulars. Balance the Petty Cash Book on 15 January 2018 and show the

reimbursement from the chief cashier

Jan 1 Received cheque from chief cashier 150

2 Bought stamps 10

3 Bought printing paper 12

4 Lend money to worker, Sulaiman 15

11

5 Paid drinks and food for guest 14
6 Paid taxi fare 8
7 Sent telegram 7
8 Bought pens, pencils and ink
16

3.
Prepare the Petty Cash Book to record the following transactions. Use the following

headings for payment analysis: Postage, Stationery, Travelling, General Expenses

and Sundries. Post to the Ledger at the end of the week.

RM

July 8 Petty cash balance 15.00

Reimbursement from chief cashier 185.00

9 Bought toner for printer 30.00

Bought lock to replace the old office lock 13.00

Paid postage for registered letters 6.50

10 Bought double-sided tape 8.00

Bought envelopes 5.50

11 Paid office cleaner 12.00

Advance to office boy 15.00

12 Paid postage for parcels 10.50

Paid taxi fare 9.00

Donation to old folks’ home 20.00

13 Donation for school walkathon 10.00

Bought sugar , tea and coffee 11.00

Bought printer cartridge 8.50

12

QUESTION AND ANSWER

4. Rule up a petty cash book with analysis columns for office expenses,

motor expenses, cleaning expenses, and casual labour. The cash float

is RM600 and the amount spent is reimbursed on 30 June.

2020 RM

June 1 F Black – casual labour 18

== 2 Letterheadings 41

== 2 Abel Motors – motor repairs 67

== 3 Cleaning materials 4

== 6 Envelopes 11

== 8 Petrol 22

== 11 P Lyon – casual labour 16

== 12 T Upton – cleaner 8

== 12 Paper clips 3

== 14 Petrol 19

== 16 Adhesive tape 2

== 16 Petrol 25

== 21 Motor taxation 95

== 22 F Luck – casual labour 19

== 23 T Upton – cleaner 14

== 24 J Lamb – casual labour 27

== 25 Copy paper 8

== 26 Lively Cars – motor repairs 83

== 29 Petrol 24

== 30 F Tred – casual labour 21

Answer to Question Petty Cash Book

Receipts Total Office Motor Cleaning Casual

600 (1) Balance b/d Exps Exps Labour
(1) F Black
(2) Letterheadings 18 18
(2) Abel Motors 41 41
(3) Cleaning materials 67 67
(6) Envelopes 4
(8) Petrol 4
(11) P Lyon 11 11 22
(12) T Upton 22 16
(12) Paper clips 16
(14) Petrol 8
8
33 19
19

13

(16) Adhesive tape 2 2 19
(16) Petrol 25 25 14
(21) Motor tax 95 95
(22) F Luck 19 27
(23) T Upton 14 8
(24) J Lamb 27 83 21
(25) Copy paper 24 26 101
(26) Lively Cars 8
(29) Petrol 83 65 335
(30) F Tred 24
21
527 (30) Cash 527
(30) Balance c/d
600
1,127
1,127

Bank Reconciliation
Statement

14

1.2 Accounting Concepts and Assumptions

They

Chapter 1
Introduction to Financial Accounting

REVIEW EVALUATION

Q1.

State

(Total [Jumlah] 10m)
[ NOV 2020 ]

15