What you need

• the petty cash book
• all the cash purchase invoices for the period.

Preparation: numbering and dating

Sort all your cash purchase invoices (receipts) into date order, and number them. (The numbers already printed on them won’t do: they are cash sales invoice numbers of the firms that issued them and no uniformity between them can be expected.) You need to give them consecutive numbers from your own numbering system, so that you can file them chronologically for each period. Many firms keep a list of such numbers for this purpose. Others give them a two part number made up of the month number (e.g. 3 for March) and a number from a consecutive list for that month.

Value Added Tax (VAT)

The VAT may not be shown as a separate item on cash purchase invoices for small amounts. If not, the petty cashier will need to calculate the VAT content, if any, of each invoice total (see page 159). HM Customs and Excise publish details of current VAT applications and rates, but a little experience will save the petty cashier having to check this every time. Briefly, if the current VAT rate is 17½, the VAT content of such an invoice is worked out like this:

Opening a new petty cashbook

When starting a new petty cash system (i.e. opening a new petty cash book) a sum of money will be entrusted as a float to the petty cashier, let’s say £50.00. He/she immediately enters this on the debit (left) side, because he/she now ‘owes’ the cashier that amount.

Step by step

• 1.Enter in the third column the date that the fund or float was received.
• 2.Write in the fourth (’particulars’) column the word ‘cash’ or ‘bank’ as appropriate, depending on whether the float came from the cashier by cash, or from the bank by cheque.
• 3.Write the imprest amount in the first column (debit cash column). Unless the system is being started from scratch, this stage will have been completed previously. The procedure for all other entries will start from step 4 below.
• 4.Record from each cash invoice the date, purchase invoice number, purpose of expenditure, gross and net invoice total and VAT, as shown on the page opposite. Enter the net total directly into a suitable analysis column.
• 5.Whenever necessary (end of period, end of page) total up the two main columns. The cashier should reimburse the petty cash fund for what has been spent, to restore the fund to its original imprest figure. Then balance the two columns, just like any other ledger account: entering a balancing item (the difference between the two totals) to make each side add up to the same amount. That balancing item should be annotated ‘balance c/d’ (carried down). The counterpart of that balancing item should then be recorded after the totals as the opening figure for the next period and annotated ‘balance b/d’ (brought down).
• 6.Next, total up each analysis column and the VAT column and cross check with the gross invoice total column, to make sure there are no mistakes.

Entering the folio references

Enter folio references for the debit side in the folio column, eg CB (cash book)7. Enter those relating to the credit side at the foot of their respective column totals: it is only the totals that will be posted to the Ledger, e.g. travelling expenses, folio reference NL6 (Nominal Ledger item 6) in the example opposite.