ACC 101 INTRODUCTION TO FINANCIAL ACCOUNTING 1

SOURCE DOCUMENTS
Source documents are the initial paper work that exchange hands between the parties
involved for a transaction to take place. Source document provide basic details of the transaction.
These are written evidences of business transactions that describe the essential facts of those
transactions. It provides adequate information for preparing the books of account. They are
business documents confirming the occurrence of financial transaction between two or more
parties. Source documents are written financial information exchange between two or more
parties as a result of engaging in business transaction. These documents are used for the first
entries in the subsidiary books of accounts. Source documents include invoices, receipts, debit
notes, credit notes, payment vouchers, cheque books, clock cards, time sheets and bank tellers.
Types and uses of source documents are discussed below. The source documents are as follows:
Receipts are evidence of payment. It acknowledges that certain amount of money had been
received or paid to a named person. It will show the actual amount paid with the date of the
payment. This is a document confirming the receipt of money for goods and service sold or
bought. Receipts are used in recording the cash book since it is evidence of cash and cheque
transactions. A receipt usually contains the name of the payers, amount paid, date of payment,
purpose of payment, signature of the receiver.

Invoice is a document sent by the seller to the buyer to inform him/her of the amount he/she
owes the business. It shows the quantity of the goods, the price, discount and terms of payment,
which means it shows complete summary of the transactions. This is a document that shows the
transfer of goods and/or provision of service between two or more parties for which payment is
yet to be received. Invoice under normal circumstance is meant for credit transactions which
include credit sales and credit purchases. However, many sole traders do not know the function
of an invoice to the extent that all their sales (cash and credit) are documented using invoice.
Invoices are recorded in sales day book or purchases day book depending if it is sales invoice or
a purchases invoice.
Credit note is a document sent by the seller to the buyer to inform him /her of the reduction
in the amount he/she owes the business, i.e. to correct overcharge which may be due to returned
goods.Credit note is a document showing a claim or refund in favour of the receiver. It is used to
correct overcharge on an invoice, allowance for minor damages to goods, and refund on goods
returned.
Debit note is a document sent by a seller to the buyer to inform him/her of an increase in the
amount he/she owes the business, i.e. to correct an undercharge. It is referred to as
supplementary invoice.A debit note is a source document that is used when a customer’s account
is to be increased, and to establish costs against the recipient. It therefore means that a debit note
will be used to effect correction when a customer/purchaser has been undercharged for goods
and/or services.
Statement of Account is a document which is sent by the seller to the buyer at regular
intervals to inform him/her of all transactions made during the period and the amount due.

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 Petty Cash voucher is the document which covers small expenses credited to the petty
cash book.
Cheque stub: is the cheque counterfoil. A cheque is an unconditional order in writing
addressed by the drawer to the banker to pay on demand a specified sum of money to the person
named as payee on the cheque. The counter foils (cheque stub) are used to update cashbook. A
cheque is a negotiable instrument that originates from banks and it is used to withdraw money
from a stated bank account in a bank. A cheque usually contains the name of the bank account
holder, the account number, the branch of the bank where the bank account is domiciled or
opened, the name of the bank, the date for the payment of the cheque, a place for the owner’s
signature, and amount to be withdrawn in words and figure.
Payment Voucher
This is a document that is used to record full details of money paid for a particular
purpose. It shows that money has left a particular account to another party or for the settlement
of financial obligation. Payment voucher will contain the name of the receiver, amount paid,
purpose of the payment, date of payment, mode of payment – cash or cheque, signature of the
receiver, name and signature of the approving authority.
Bank Teller
This is a document that emanate from the bank because a bank teller is used to pay or
lodge money (cash and cheques) into an account in a bank. It serves as evidence that a payment
has been made or lodged into a particular account with a stated branch of a bank. Bank teller will
contain the name of the depositors, account to which deposit is made, the name of the bank
account holder, amount deposited in words and figure, date of the deposit, serial number of the
teller, signature and stamp of the bank official that collected the deposit on behalf of the bank.
DOUBLE ENTRY PRINCIPLE AND THE LEDGERS. DOUBLE
ENTRY BOOKKEEPING
Principle of Double entry
Double entry bookkeeping is the system of keeping account that take advantages of the
two-fold aspect of every transaction, whereby one account that receives is debited and another
account which gives is credited. Double entry principle states that, “For every DEBIT entry there
must be a corresponding CREDIT entry and for every CREDIT entry there must be a
corresponding DEBIT entry” which means whenever there is a giver there must be a receiver,
therefore debit the receiving account and credit the giving account. Credit the giving account and
Debit the receiving account. To Credit an account, put the amount on the right side of the
account and to debit is to put the amount on the left-hand side.
Debit Side Credit Side
Receiving Side Giving Side
This is the principle upon which the actual posting or recording of transaction is based. The
principle recognizes that there are two parties to a transaction and each of them is involved in an
exchange requiring the giving up of a value and the acquisition or receipt of another value.
How do you recognize the account to be credited or debited?
In order to apply the principle of double entry, it is necessary to follow the following steps:
1. Identify the two accounts required
2. Identify the account which is receiving the value of the transaction and the account which
is giving the value.

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 3. A debit entry should be posted to the account which is receiving the value
4. A credit entry should be posted to the account which is giving value. For instance, when
a man goes out to buy a loaf of bread, he parts with a #100 note and receives in return a
loaf of bread. From the point of view of the bread seller, he parts with a loaf of bread and
receives in return a #100 note, if either of them wants to record that fact, he must look at
the two sides as it affects him, this is what double entry is all about.
Buying and Selling of Bread

Bread Eater Bread Seller

#100 - out Loaf of bread - out
Loaf of bread – in #100 - in
The two accounts (i.e., giving and receiving account) must be related in the following ways:
1. Opposite i.e., the transaction that appears on one side of an account should be the same
with one that appear on the other side of the same account.
2. Equal.e. the amount involved must be equal
3. Correspond i.e. the two account must cross reference one another. Transactions are
recorded (or posted) to the ledger in line with double entry principle. This principle
requires that the dual (i.e. double) effect of every transaction should be recorded by
posting a debit entry to one account and corresponding credit entry to another account
e.g. in cash account put bread - #100 and in bread account put cash. For example.
Dr CASH ACCOUNT Cr

N N
1/2/16 bread 100
Dr BREAD ACCOUNT Cr
N N
1/2/16 Cash 100
Advantages of Double entry bookkeeping
1. Control of business on daily basis is easier, since it records all information about all the
transactions.
2. It helps to keep a complete record of each transaction.
3. It is easy to prepare the final accounts with double entry bookkeeping
4. It helps to check arithmetical accuracy of the recorder.
SUBSIDIARY BOOKS (CASH BOOKS AND JOURNALS)
Subsidiary books are books of prime entry or books of first entry or books of original
entry where all cash and credit transactions are recorded. These are books into which
transactions are recorded on a daily basis from the source documents and from which transfers
are made at suitable periodic intervals to the relevant accounts in the ledger. It helps to prevent
the ledger from containing too much detail.
Types of Subsidiary books
The subsidiary books normally used in financial accounting are as follows:
 Sales day book or sales journal which records credit sale
 Purchases day book or purchases journal or bought journal which records credit
purchases
 Returns inward day book or return inward journal or Sales return records returns from
customers.

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  Returns Outwards day book or return Outwards journal or purchases return records
returns to suppliers.
 General journal or Journal proper records other transactions.
 Cash book records the receipt and payment of money.
Subsidiary Books are books in which accounting transactions are first recorded before been
posted to their various accounts in the ledger. Subsidiary books are also called books of prime
entries or books of original entries. These books are not account with the exception of the cash
book, but the balances from the subsidiary books are used to update accounts. The subsidiary
books are:
i. Sales day book or sales journal
ii. Purchases journal or purchases day book
iii. Returns inwards journal or returns inwards day book
iv. Returns outwards day book or returns outwards journal
v. Journal or Journal proper
vi. Cash book or single column cash book
vii. Two column cash book
viii. Three column cash book
ix. Petty cash book

Sales day book or sales journal

This is a book of original entry or first entry or prime entry which records credit sales. As
credit sales occur, they are listed in the sales day book which is ruled up to show the date of the
sale, the customer’s name, detail and total amount. The customer’s personal account is debited
while the credit entry to sales account is delayed. At the end of the period (which may be weekly,
monthly, quarterly or any other convenient period), the total of the sales day book shall be posted
to the credit side of sales account in the general ledger. At this point the double entry for the
credit sales is now complete. The sales day book is not an account and therefore does not form
part of the double entry records. However, the use of sales journal reduces the number of entries
in the sales account.
SALES DAY BOOK OR SALES JOURNAL
Sales journal is a book of original entry used to record all goods sold and services
rendered on credit to a third party in the order in which they occurred irrespective of the amount
involved. The sales day book or sales journal is not an account because it does not have a debit
or credit side, and neither can cash sales nor other cash and bank transactions be recorded in it.
The value of credit sales which are first recorded in the sales journal will be transferred
individually to the respective customer’s account in the ledger (see unit 12), while the total of all
credit sales for the period as recorded in the sales day book is transferred to the credit side of the
sales account in the ledger. The process of transferring from the day books to the ledger is called
posting. This is achieved for all credit sales by debiting the customer’s (debtors) account with
individual customer amount and crediting the seller’s (sales) account.
Example:
July 6 Sold to David:
10 dozen of Sandals at #1500 a dozen

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 15 Clocks at #1000 each
Trade discount 25%
July 25 Sold to Ade:
18 Radio set at #900 each
20 Television set at #10000 per set
Trade discount 10%
You are required to prepare sales journal and post the items to the ledger.
SOLUTION:

SALES DAY BOOK

Date Name and Particulars Folio Details Total
N N
July 6 David:
10 dozen of Sandals at #1500 15,000
15 Clocks at #1000 each 15,000
30,000
Less Trade Discount (25% x #30000) 7,500 22,500

July 25 Ade:
18 Radio set at #900 each 16,200
20 Television set at #10000 per set 200,000
216,200
Less 10% trade discount (10%x36200) 21,620 194,580
Total transferred to the credit of Sales account 217,080

Dr SALES ACCOUNT Cr
N N
July 217,080
Dr DAVID’S ACCOUNT Cr
N N
July 6 22,500
Dr ADE’S ACCOUNT Cr
N N
July 25 194,580
Purchases day book or purchases journal or bought journal
Purchases journal is the book of original entry or first entry or prime entry which records
credit purchases. As credit purchases occur, they are listed in the purchases day book which is
ruled up to show the date of the sale, the customer’s name, detail and total amount. The
customer’s personal account is credited while the debit entry to sales account is delayed until the
end of the period. Then the total of the purchases journal is transferred to the debit of the
purchases account in the general ledger thereby completing the double entry for the credit
purchases. Purchases day book is a subsidiary book of account used to record all goods bought
and services received on credit from a third party in the order in which they occurred irrespective
of the amount involved. The purchases journal is not an account because it does not have a debit
or credit side, and neither can cash purchases nor other cash and bank transactions be recorded in

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it. After transferring accounting information from the source documents – purchases invoice – to
the purchase’s day book, the value of credit sales which are first recorded in the purchase’s day
book will be transferred individually to the respective suppliers account in the ledger. The total
of all credit purchases as recorded in the purchases journal for a particular period, usually a
month, is transferred to the debit side of the purchases account in the ledger. The process of
transferring from the purchases day book to the ledger is called posting. This is achieved for all
credit purchases by crediting the supplier’s or seller’s (creditor) account with individual amount
of each supplier, and debits the buyer’s (purchases) account.
Example:
August 5 Bought goods on credit from Lawrence:
10 rulers at #100 each
16 Big notes at #100 each
Less 21/2% trade discount
August 30 Purchased on credit from Odun:
15 Shoes at #300 each
14 Shirts at #2000 each
Less 5% trade discount.
PURCHASES DAY BOOK
Date Name and Particulars Folio Details Total
N N
August 5 Lawrence:
10 rulers at #100each 1,000
16 Big notes at #100 each 1,600
2,600
Less 21/2% trade discount (5/200x 2600 65 2,535
August 30 Odun:
15 Shoes at #300 each 4,500
14 Shirts at #2000 each 28,000
32,500
Less 5% trade discount. 1,625 30,875

Total transferred to the debit of Purchases account 33,410

Dr PURCHASES ACCOUNT Cr
N N
August 33,410
Dr DAVID’S ACCOUNT Cr
N N
August 5 22,500
Dr ADE’S ACCOUNT Cr
N N
August 30 30,875
Returns Inward Day book or Sales Returns Day book
This is the book for recording goods previously sold but later returned by the customers
to the business. Goods may be returned as a result of inferior quality or damage in transit, ‘credit
notes’ are issued to the customers indicating that their personal accounts are being credited with

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the value of goods they returned thereby reducing the amount being owed by them. In order to
prevent the ledger from containing unnecessary details, a return inward day book is maintained
in which all the credit notes are listed, while the customers’ personal accounts are credited. At
the end of the period, the total of the returns inwards day book is posted to the debit side of the
returns inwards account in the general ledger thereby completing the double entry for the returns
from customers. A return inwards day book is outside the double entry system but its use
prevents the returns inwards account from being congested with too many entries.
Example:
July 8 David returned
one doze ewn of sandals
2 clocks
July 27 Ade returned 3 sets of radio
2 television sets
SOLUTION:
RETURN INWARDS DAY BOOK
Date Name and Particulars Folio Details Total
N N
July 6 David:
one dozen of Sandals at #1500 1500
2 Clocks at #1000 each 2000
17000
July 25 Less Trade Discount (25% x #30000) 4250 12750
Ade:
3 Radio set at #900 each 2700
2 Television set at #10000 per set 20000
22700
Less 10% trade discount (10%x36200) 2270 20430
Total transferred to the debit of return inward
account 33180

Dr RETURNSINWARDS ACCOUNT Cr
N
July 33180
Dr DAVID’S ACCOUNT Cr
N
July 6 RIJ 12750
Dr ADE’S ACCOUNT Cr
N
July 25 RIJ 20430
RETURNS OUTWARDS JOURNAL OR PURCHASES RETURNS JOURNAL
This is the book that records goods returned to suppliers by the business. Goods can be
returned as a result of damages or defectiveness. When goods are returned to suppliers debit
notes are issued to them to indicate that the suppliers’ personal account are being debited with
the value of goods returned to them i.e. to reduce the debt being owed to them. These debit notes
are listed in the returns outwards day book while supplier’s personal accounts are debited. The
double entry shall be completed when, at the end of the period, the total of the returns outwards

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day book is posted to the credit side of the returns outwards account in the general ledger.
Returns outwards journal is not part of the double entry records.
Example:
August 8 Returned to Lawrence:
3 rulers at #100 each
5 Big notes at #100 each
Less 21/2% trade discount
August 30 Returned to Odun:
3Shoes at #300 each
4Shirts at #2000 each
Less 5% trade discount.
SOLUTION:
RETURN OUTWARDS DAY BOOK
Date Name and Particulars Folio Details Total
N N
July 6 Lawrence:
3 dozens of rulers at #100 300
5 big notes at #70 each 350
650
July 25 Less Trade Discount (21/2% x #800) 16.25 633.75
Odun:
3Shoes at #3000 each 9000
4 Shirts at #2000 each 8000
17000
Less 5% trade discount (5%x8600) 850 16150
Total transferred to the credit of returns
outwards account 16783.75

Dr RETURN OUTWARDS ACCOUNTCR

N
July 16783.75
Dr DAVID’S ACCOUNT Cr
N
July 6 ROJ 633.75
Dr ADE’S ACCOUNT Cr
N
July 25 ROJ 16150
JOURNAL PROPER OR GENERAL JOURNAL
The journal proper is used to record other transactions which cannot be recorded in the
other day books such as:
 The purchase and sale of fixed assets on credit
 Opening entries
 Correction of errors
 Transfer from one account to another
 Taking of goods by the owner from the business for his private use
 Any other transaction which cannot be recorded in any of the other subsidiary books.

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Advantages of Journal proper
 The journal book is a kind of diary of transactions which cannot be recorded by the other
subsidiary books.
 The journal book gives the explanation for each entry through the narration attached to
each journal entry.
 The journal book also serves as a book of instruction to the bookkeeper telling him/her
which account to be credited or debited.
The following are the examples of journal proper:
Example 1; Purchase of fixed Asset on credit
A motor vehicle was purchased by Wale and sons ltd on credit at a cost of #800000 from
Royal Rider Motors on 20th October 2016.
Solution:

Debit Credit
N N
Motor Vehicle Account 800000
Royal Rider Motors Account 800000
Being cost of motors vehicle purchased on credit from
Royal Rider Motors on 20th October 2016
Example 2: Transfer from one account to another
A debtor, Obaloluwa, who owed Jesutofunmi Enterprises N300,000 was declared bankrupt
on 5th April 2017. He however convinced his friend, Mofoluwaso, who is also a customer of
Jesutofunmi Enterprises to pay the debt on his behalf. Thereafter, Mofoluwaso wrote a letter
to Jesutofunmi Enterprises on 12th April 2017 directing that Obaloluwa’s debt be transferred
to his own account.
The journal entry to effect the transfer will look as follows:
Debit Credit
N N
Mofoluwaso Account 300,000
Obaloluwa Account 300,000
Being transfer of the indebtedness of Obaloluwa to the
account of Mofoluwaso per his letter dated 12th
October, 2017.
CASH BOOK
Cash book is the book of prime entry where all cash transactions are recorded. In a
business organization, the function of receiving and paying out money (either in cash or by
cheque) requires a considerable number of entries. If these transactions are posted directly to
the ledger, the bank account and cash account will contain too many entries. Cash book is
both a subsidiary book and a ledger.
Types of Cash book
 Single (one) column cash book
 Double (Two) column cash book
 Three column cash book
 Petty cash book
Example of Single column cash book
Enter the following transactions in the cash book of Oluwaseun for the month of February

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 N
Feb. 1 Cash in hand 15000
Feb. 4 Cash paid to Odunola 2500
Feb.10 Cash sales 5000
Feb. 12 Cash purchases 7500
Feb. 15 Bought stationery 500
Feb. 20 Paid insurance 300
Feb. 23 Paid wages 250
Feb. 26 Cash sales 1150

Solution:
Oluwaseun Cash Book for the month of February
Date Particulars Folio Amount Date Particulars Fol Amount
N N
Feb. 1 Balance b/f 15000 Feb. 4 Odunola 2500
4 Sales 5000 12 Purchases 7500
26 Sales 1150 15 Stationery 500
20 Insurance 300
23 Wages 250
______ Balance c/d 10100
21150 21150
Balance b/d #10100
Double Column Cash Book
This cash book is called two columns because it has two columns, one for cash
transactions and the other for bank transactions. The two columns on the debit side record the
receipts of money while the two columns on the credit side record payment of money. The bank
columns record the cheques paid to or received from the bank.
Contra Entry
Contra entry is where a double entry for a transaction appears on both sides of the cash
book. It is a latin word which shows that cash has been withdrawn from the office and deposited
in the bank or withdrawals of cash from bank for office use.
Example:
Write up a two-column cash book from the following details, and balance off as at the end of the
month:
March 1. Balances brought down from last month: N
Cash in hand 1500
Cash at bank 20000
March 2 Paid water charges by cheque 1000
March 3 Paid for postage stamps in cash 500
March 5 Cash sales 7000
March 7 Cash paid into bank 6000
March 8 We paid Taiwo by cheque 700
March 10 We paid Samuel in cash 200

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March 12 Joseph pays us #1500, #500 being in cash and #1000 by cheque
March 17 Cash drawings by proprietor 2000
March 20 Pade pays us by cheque 900
March 22 Withdrew #2000 from the bank for office use
March 24 Bought a new motor van for #1900 cash
March 28 Paid rent by cheque 4000
March 31 Cash sales paid direct into the bank 1000
Solution:
TWO COLUMN CASH BOOK FOR THE MONTH OF MARCH
Date Particulars Fol Cash Bank Date Particulars Fol Cash Bank
N N
Mar 1 Balances b/f 1500 20000 Mar Water charges 1000
5 Sales 7000 2 Postage 500
7 Cash 6000 3 stamps 6000
12 Joseph 500 1000 7 Bank 700
20 Pade 900 8 Taiwo 200
22 Bank 2000 10 Samuel 2000
31 Sales 1000 17 Drawings 2000
22 Cash 1900
24 Motor van 4000
_____ _____ 28 Rent c/d 10600 7700
11000 28900 Balance 11000 28900
Balance b/d N10600 N 7700
THREE COLUMN CASH BOOK
This is a cash book with three columns which are Cash, Bank and discount accounts. The
discount columns though have appearance of account column but are to be regarded as
memoranda only because periodic total is only needed to be entered into discount accounts.
Discount accounts are nominal accounts. Discount allowed is on the debit side while discount
received is on the credit side.
Discounts: Discount can be defined as the amount reduced from the price of goods in order to
encourage bulk purchases or prompt payment. Discounts are given to encourage settlement of the
debts within a specified period of time, to avoid risk of bad debts, it attracts customers and to
avoid tying down of business capital.
Discount
Discount can be defined as an inducement given to customers to enable them buy in large
quantity, obtain profit margin price when goods are sold and/or for prompt payment by
debtors. There are different types of discounts as explained below. 3
Trade Discount
Trade discount is a reduction in price given to a customer who buys for re-sale in large
quantity. The purpose is to enable the customer achieve a profit margin when the goods are
sold.
Cash Discount
This is an inducement given to debtors (credit customers) for paying their debt on time or
promptly within the specified time frame or period. It means that, a credit customer can

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 enjoy both the trade discount and cash discount provided the terms for the discounts as
specified by the seller are met.

Quantity Discount
Quantity discount is a price reduction given to a customer who buys in large quantity for
consumption and not for re-sale.
Relationship between Sales and Discounts
The relationship that exists between sales and discounts depend on the nature of the
transaction, either credit sales or cash sales. The relationships are explained below.
Credit sales
The discount available to those who buy on credit or the customer (Debtors) at point of sale
is trade discount. The trade discount can be stated as a percentage of the sales price or a
uniform amount that varies with sales value. Where trade discount is given on credit sales,
the discount value will be deducted from the sales value in the invoice. The customer will
owe the seller the sales value less the trade discount. It is the net price that will be recorded
in the customer’s account.
Cash sales
As a matter of clarity, trade discount is not given on cash sales; hence, trade discount will
be treated with credit sales as explained above. For cash sales, a customer could get cash
discount and/or quantity discount. Quantity discount would have been deducted from the invoice
leaving the net value which the customer is expected to pay immediately or at a given time. Cash
discount can only be recognized when the customer settles his outstanding invoices. Hence, cash
discount is treated in accounting records when payment is received from the customer (Debtor).
The book of account used for treating this is called three column cash book,
Types of Discounts
This is the reduction in the price of goods in order to encourage bulk buying.Trade
discount is normally stated as a percentage of the normal selling price.
Cash Discount:
This is the reduction in the price of goods in order to encourage prompt payment. Cash discount
is normally stated as a percentage of the debt due. Unlike in the case of trade discount cash
discount shall be recorded in the double entry system. In thatbooks of the seller (i.e. the creditor)
the cash discount allowed is an expense while in the books of the buyer (i.e. the debtor) the cash
discount received in an income.
Example of a three column cash book:
Write up a three column cash book from the following details balance off at the end of the
month, and show the relevant discount accounts as they would appear in the general ledger:
April 1 Started business with #500000 in the bank
2 Bought goods paying by cheque #3000
4 Cash sales #13000
5 Received loan from Babajide in the form of a cheque #10000
6 Paid Joseph #5000 owing to him by means of a cheque #4700, he allowing us #300
Discount
7 Kehinde paid us his account of #7500 by means of a cheque for #7100, we allowed him
#400 discount.

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 8 Paid Helen a cheque for #15000, discount received #600
9 We received a cheque for #20000 from Niran, discount allowed #800
10 We paid each of the following accounts by cheque, in each case we first deducted a cash
Discount of 5 percent: Lydia #600; Bola #1000; Jega #1400.
11 We paid Usman a cheque for #500
12 paul pays us a cheque for #7000
15 The following persons pay us their accounts by cheque, in each case deducting a cash
Discount of 21/2 percent: Emmanuel #2000; Ameachi #6000; Oye#4000
16 Paid James his account of #4000 by cash #3800, having deducted #200 cash discount
19 Paid motor expenses by cheque #2000
25 Cash drawings #5000
26 Cash sales paid direct into the bank #7000
29 Elijah pays us a cheque for #7800, having deducted #200 cash discount
30 We paid Grace his account of #2400 by cheque #2300, #100 being deducted for cash
Discount.
THREE COLUMN CASH BOOK FOR THE MONTH OF APRIL
Date Particulars F Discou Cash Bank Date Particulars F Discount Cash Bank
nt N N received N N
allowed
April 1 Capital 500000 April 2 Purchases 30000
4 Sales 10000
5 Babajide 10000 6 Joseph 300 4700
7 Kehinde 4000 7100 8 Helen 600 15000
9 Niran 800 20000 10 Lydia 30 570
12 Paul 7000 Bola 50 950
15 Emmanuel 50 1950 Jega 70 1330
Ameachi 150 5850 11 Usman 500
Oye 100 3900 16 James 200 3800
26 Sales 7000 19 Motor 20000
29 Elijah 200 7800 expenses 5000
25 Drawing 100 7800
30 Grace
_____ _____ ______ Balance c/d _____ 5000 84650
5300 10000 570600 1350 10000 570600
Balance b/d N5000 N84650

PETTY CASH BOOK

In the operation of a business there used to be large number of small cash payments,
which may be taken out of the main cash book to a separate cash book known as petty cash book.
Advantages of petty cash book
 Junior staff known as petty cashier may be delegated to handle and record all the small
cash payments which save the main cashier from routine work.
 It ensures that small payments are not posted to the ledger one by one i.e. it saves the
ledger from too much detail.
The Imprest System
The imprest system is a system in which small cash payments are accounted for by giving
the petty cashier an amount known as petty cash float out of which the petty cashier makes
disbursements, each disbursement being supported by duly authorized/ approved petty cash
voucher (PVC) signed by the recipient. The amount of petty cash float is determined by the
management and is given to the petty cashier by the main cashier. At the end of the period or
when the float is almost exhausted, the petty cashier will apply for reimbursement of an amount

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equal to the total amount disbursed. He / She shall submit the petty cash vouchers as evidence of
the cash disbursed. If the main cashier is satisfied, the reimbursement will be made to petty
cashier thus replenishing or restoring the float to the original amount out of which the petty
cashier begin to make disbursement all over again.
Example of a petty cash book:
The following is a summary of petty cash transactions of a business organization for the month
of June 2017. The business maintains a petty cash float of #50000.
N
June 1 petty cash float given to petty cashier
2 postages 2000
5 Transport fare 4500
8 Cleaning materials 3500
9 Stationery 1700
14 Petrol for delivery van 8800
16 Taxi Fare 3900
20 Postages 1800
21 Disinfectant for cleaning toilet 2800
23 Petrol for general manager’s car 6600
24 Services of delivery van 4000
28 Writing materials 3100
30 Transport fare 1200
You are required to write up a petty cash book with columns for Postages, Transport and
Travelling, Cleaning, Stationery and Motor Expenses and enter the month’s transactions and the
reimbursement on 30th June 2017 necessary to restore the imprest.

PETTY CASH BOOK

PAYMENTS
Receipts Date Details Total Postages Trans.&Trav. Cleaning Stationery Motor Expenses
N N N N N N N
50000 June 1 Cash float
2 Postages 2000 2000
5 Transport fare 4500 4500
8 Cleaning materials 3500 3500
9 Stationery 1700 1700
14 Petrol for del. Van 8800 8800
16 Taxi Fare 3900 3900
20 Postages 1800 1800
21 Disinfectant 2800 2800
23 Petrol for GM’s car 6600 6600
24 Services of del. Van 4000 4000
28 Writing materials 3100 3100
30 Transport Fare 1200 1200
43900 Reimbursement 43900 3800 9600 6300 4800 19400
______ 30 Balance c/d 50000
93900 93900
July 1 Balance b/d 50000

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