Observation

Majority of the candidates that attempted this question were able to define petty cash book but failed to explain the advantages for operating the petty cash book as a result, they recorded low marks. The expected answers include:

(a) (i) A Petty Cash Book is both a book of original or prime entry and a ledger account. This is used for recording cash transactions which are particularly small and too numerous to be conveniently entered in the main cash book.

(ii) The source documents are:

• Receipts;
• Petty Cash vouchers;
• Bills;
• Invoices;
• Certificate of honour.

(b) The Imprest system is a system where the main cashier give the petty cashier a specified sum known as cash float to meet petty expenses incurred during the period.

The petty cashier after paying approved petty cash vouchers is re-imbursed with the amount spent after the main cashier has certified the payments made.

(c) The advantages of operating petty cash system are:

(i) The main cashier is relieved from paying small expenses;
(ii) It saves space in the main cash book;
(iii) Postings into the ledger becomes easier since only totals are posted to the general ledger;
(iv) Controlling the activities of the petty cashier is easier when separated from the main cashier’s duties;

(v) It ensures accountability for every expenditure since all are supported by documentary evidence;
(vi) It serves as a means of training accounts clerk;
(vii) It is easy to operate.