The Petty Cash Book is used to record receipts and payments of petty cash.
The way a Petty Cash Book is posted to the General Ledger is very similar to the way that a Cash Book is posted (which is unsurprising given that both record receipts and payments of money). In this section we will look at how the Petty Cash Book is posted when:
- It is not being used as part of the double-entry bookkeeping system (i.e. it is not used to calculate and record balances of petty cash and a separate Petty Cash Account is still used in the General Ledger); and
- It is being used as part of the double-entry system (i.e. the Petty Cash Book records balances of petty cash and no Petty Cash Account is used in the General Ledger)
1 When the Petty Cash Book is not used as part of the double-entry system
The receipts side of the Petty Cash Book will be posted as follows:
- The total received during the period will be debited to the Petty Cash Account (since this represents an increase in the value of the Petty Cash asset)
- The individual receipts will be credited to appropriate accounts
So, the postings list for the above example will be:
The payments side of the Petty Cash Book will be posted as follows:
- The total paid during the period will be credited to the Petty Cash Account (since this represents a decrease in the value of the Petty Cash asset)
- The totals of the columns recording types of payments will be debited to appropriate accounts
So, the postings list for the above example will be:
The postings would then appear in the General Ledger accounts as shown below:
[Note. When petty cash is drawn from a business’ bank account it will be recorded as a bank payment in the Cash Book and as a receipt in the Petty Cash Book. Care must be taken in this situation to ensure that the amount does not end up being posted twice to the General Ledger (i.e. once from the Cash Book and once from the Petty Cash Book). This potential problem tends not to be examined but it is something that can be an issue in the real world]
2 When the Petty Cash Book is used as part of the double-entry system
Where the Petty Cash Book is being used as part of the double-entry system our postings and entries in the General Ledger accounts are almost identical to those shown above. The only difference is that nothing will be posted to a Petty Cash Account in the General Ledger since the entries and balances can already be found in the Petty Cash Book itself.
The postings lists for the receipts and payments sides of the Petty Cash Book will therefore be as follows:
