Q.(OR) From the following information, prepare an Analytical Petty Cashbook for the week ending on 7th April, 2023:
2023
April 1 - Balance of cash in hand with the petty cashier - Rs. 1,000
April 1 - Paid for postage - Rs. 240
April 2 - Paid for carriage - Rs. 210
April 3 - Received from head cashier - Rs. 1,800
April 4 - Paid for coolie charges - Rs. 170
April 4 - Bought postage and stamps - Rs. 230
April 4 - Paid for bus fare for office peon - Rs. 180
April 5 - Received from head cashier - Rs. 800
April 5 - Paid for carriage - Rs. 820
April 6 - Paid for taxi hire charges for manager - Rs. 770
April 6 - Paid for cleaning washroom - Rs. 400
April 7 - Paid for printing and stationery - Rs. 220

The Imprest System of Petty Cash – A First Look

Think about the last time you went to buy a few small things for home — maybe a notebook, some pens, or a packet of biscuits. You probably didn't write a cheque or do a bank transfer. You just used cash from your pocket. Now imagine you run a business. Every day, small expenses pop up: tea for visitors, bus fare for a messenger, a stamp, a few rupees for stationery. If the main cashier had to handle each of these tiny payments, it would be chaos — and the main cash book would become a messy list of trivial amounts.

That's where petty cash comes in. The business gives a small amount of cash to a junior employee (the petty cashier) to pay for these minor, routine expenses. But here's the key question: how do you keep control of that cash without making the petty cashier's job a nightmare? The answer is the Imprest System.

The Core Idea – What "Imprest" Really Means

The word "imprest" comes from an old Italian word meaning "to lend" or "to advance". In this system, the petty cashier starts a period (usually a week or a month) with a fixed, agreed-upon amount of cash. Let's call this the imprest amount — say, ₹500.

Over the period, the petty cashier pays for small items and collects receipts. At the end of the period, the total of all payments made is calculated. Suppose the petty cashier spent ₹420. What cash is left in the box? ₹80 (₹500 – ₹420).

Now comes the clever part: the main cashier reimburses the petty cashier exactly the amount spent — ₹420. This brings the cash in the box back up to the original imprest amount of ₹500. The cycle repeats.

Why Bother? The Practical Reasons

Without the imprest system, the petty cashier might ask for money whenever the cash runs low. The main cashier would have to check each request, and the petty cash book would be a mess. With the imprest system:

• Control is automatic. The main cashier only ever reimburses the exact amount spent. If the petty cashier claims ₹420 but the receipts total only ₹400, the discrepancy is immediately visible.
• Accounting is simple. The main cashier makes one journal entry per period (for the total reimbursement), not dozens of tiny entries.
• The petty cashier is accountable. The cash in hand plus the total of receipts must always equal the imprest amount. This is a built-in check.

The Accounting Treatment – What Gets Debited and Credited

When the main cashier gives the initial imprest amount to the petty cashier, the entry is:

Journal Entry (Initial Advance)

Now, during the period, the petty cashier pays expenses. The petty cashier records these in a Petty Cash Book (a separate book, not the main cash book). The main cashier does not make any entry for these individual payments.

At the end of the period, the petty cashier submits a statement of expenses along with the receipts. The main cashier then reimburses the amount spent. The journal entry for this reimbursement is:

Journal Entry (Reimbursement at End of Period)

Notice: the individual expense accounts are debited (because expenses are being recognised), and Cash A/c is credited (because cash is going out of the main cash box). The Petty Cash A/c itself is not touched in this entry — its balance remains at the imprest amount (₹500) because the cash was replenished, not reduced.

The Petty Cash Book Format (Columnar)

The petty cash book is not a simple two-column book. It has a payments side with separate columns for each common type of expense. Here is a typical format (using the same example):

Petty Cash Book (Imprest System) …