Learning Outcomes
After studying this article, you will be able to explain how the petty cash imprest system operates, describe the role and structure of petty cash vouchers, and demonstrate how analysis columns are used to record and categorise petty cash payments. You will be able to apply this knowledge to ensure accurate recording, control, and reconciliation of small cash expenditures—critical for the ACCA FA1 exam.
ACCA Recording Financial Transactions (FA1) Syllabus
For ACCA Recording Financial Transactions (FA1), you are required to understand how petty cash transactions are controlled, recorded, and analysed. This article focuses on:
- The purpose and operation of the petty cash imprest system
- Preparation and authorisation of petty cash vouchers, including treatment of tax elements within expenses
- The design and use of analysis columns in the petty cash records
- Procedures for recording, reconciling, and controlling petty cash transactions
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- Which document must be completed, signed, and authorised before reimbursing a petty cash claim?
- In a petty cash imprest system with a set float of $100, what action is required if, after a week, vouchers total $38.50?
- Why are analysis columns included in the petty cash book or log?
- What type of supporting evidence is needed when claiming petty cash for expenses that include sales tax?
Introduction
Businesses must track and control small, routine cash payments, from taxi fares to minor office supplies. The petty cash imprest system is designed for this purpose, ensuring that each small expense is authorised, supported, and recorded. This article focuses on how the imprest system works, the correct preparation and use of petty cash vouchers, and the role of analysis columns in recording and allocating petty cash payments.
Key Term: petty cash imprest system
A system where petty cash is maintained at a fixed amount. The float is restored regularly, and the sum of cash in hand plus vouchers always equals the set imprest amount.Key Term: petty cash voucher
A petty cash voucher is a document completed for every claim made from petty cash, detailing the amount, reason for the expense, claimant's signature, authorisation, and any supporting evidence.Key Term: analysis columns
Columns in the petty cash record book or log used to categorise and allocate payments by type of expense (e.g. postage, stationery, travel).
PETTY CASH IMPREST SYSTEM: PURPOSE AND PRINCIPLES
The imprest system provides strict control over small cash expenses. A fixed sum—known as the imprest amount or float—is held in cash. As expenses are reimbursed from petty cash, each payment is recorded on a petty cash voucher. Periodically, the sum of vouchers and remaining cash should equal the original imprest amount. The float is restored (topped up) by the total of the vouchers.
Key Term: float
The set amount of cash allocated for petty cash payments within the imprest system.
Why Use Imprest?
- Prevents overspending and detects missing funds, as the cash plus vouchers always checks back to the set float.
- Simplifies reconciliation and control—shortages or discrepancies are quickly identified.
- Ensures all payments are supported and authorised before reimbursement.
Authorisation and Control
Each petty cash claim must be accompanied by a completed voucher, signed by the claimant and authorised by an appointed person. Supporting documentation (receipts, tickets) must be attached. Claims lacking proper evidence or authorisation should not be processed.
Worked Example 1.1
An office maintains a petty cash imprest float of $80. At the end of the week, the vouchers total $23.75. How much cash should be withdrawn from the bank to restore the float?
Answer:
Withdraw $23.75 from the bank. After replenishment, the cash in hand will return to $80.
PETTY CASH VOUCHERS: COMPLETION AND REQUIREMENTS
Petty cash vouchers are the main source documents for all petty cash payments. They record essential details for each transaction.
A valid petty cash voucher should contain:
- A unique voucher number (sequenced for control)
- Date of the claim
- Amount requested
- Details of expense/purpose
- Claimant’s signature
- Authorisation signature
- Supporting evidence attached (e.g. receipt, ticket)
Attached supporting evidence is essential—no evidence usually means no payment. Where sales tax is included in a claim, the receipt must show the supplier’s registered tax number to allow recovery.
Worked Example 1.2
Lee purchases postage stamps for $5.20 and seeks reimbursement from petty cash. What supporting documentation should be attached to the voucher?
Answer:
Lee should attach the original till receipt for the stamps. The receipt should clearly show the supplier and the amount paid.
Handling VAT or Sales Tax
When a claim includes sales tax that can be reclaimed, the voucher should show the expense net of tax, the tax amount, and the gross total. Only with a tax invoice or approved till receipt is sales tax recoverable.
Exam Warning
Failure to provide supporting documentation—especially tax receipts where VAT or sales tax is claimed—means sales tax cannot be properly recovered or recorded. Always check receipts for required details.
ANALYSIS COLUMNS IN THE PETTY CASH RECORD
The petty cash book or log uses analysis columns to categorise payments for posting to the correct general ledger accounts. Typical analysis columns may include:
- Travel (fares, taxi)
- Postage
- Office supplies
- Refreshments
- Sales tax
- Miscellaneous/Sundry
Each voucher is entered, showing the total amount in the payments column, and then split into relevant analysis columns. Where sales tax applies, it is separately identified, and the net amount is recorded under the expense type.
Worked Example 1.3
Vouchers recorded for the week:
- Voucher 102: Taxi fare $8.40 (no tax)
- Voucher 103: Stationery $9.60 (includes $1.60 sales tax)
- Voucher 104: Coffee $4.00 (no tax)
How are these entered in the analysis columns?
Answer:
Voucher 102: $8.40 in Travel column.
Voucher 103: $8.00 in Stationery column, $1.60 in Sales tax column.
Voucher 104: $4.00 in Refreshments (or Sundry) column.
RECONCILING AND RESTORING THE PETTY CASH FLOAT
At regular intervals—usually weekly or monthly—the petty cash log or book is totalled and the float is restored to the original imprest amount. The sum of all vouchers (payments) is calculated, the log is totalled by analysis column for posting, and the float is topped up by drawing cash from the bank for the total spent. Remaining cash plus the value of vouchers must always equal the imprest float.
Revision Tip
Check petty cash regularly—count both cash on hand and vouchers. Any shortage must be investigated immediately and explained.
Summary
The petty cash imprest system maintains control over small, incidental business expenses. Each claim is documented on a voucher, checked, and allocated to the correct analysis column for accurate accounts posting. Balancing and restoring the imprest float ensures proper control and makes fraud, error, or mismanagement easy to detect.
Key Point Checklist
This article has covered the following key knowledge points:
- The operation and control principles of the petty cash imprest system
- Completion and authorisation requirements for petty cash vouchers
- The role and documentation required for supporting evidence, including treatment of sales tax
- How to use analysis columns to allocate and record petty cash payments accurately
- The reconciliation and restoration of the petty cash float in a business
Key Terms and Concepts
- petty cash imprest system
- petty cash voucher
- analysis columns
- float