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Difficulty: MediumPetty Cash Book and the Imprest System

Under the imprest system, a petty cashier receives a cash reimbursement from the main cashier at the end of the period to restore the petty cash float to its agreed level. Which of the following represents the correct double-entry record for this reimbursement transaction?

  1. Debit Petty Cash Account and Credit Cash/Bank AccountAnswer
  2. B
    Debit Cash/Bank Account and Credit Petty Cash Account
  3. C
    Debit Expense Accounts and Credit Cash/Bank Account
  4. D
    Debit Petty Cash Account and Credit Capital Account

Answer

Debit Petty Cash Account and Credit Cash/Bank Account
When the main cashier replenishes the petty cash float, money flows from the main cash or bank account into the petty cash box. Therefore, following standard asset account rules, the Petty Cash Account is debited to show an increase in petty cash assets, and the Cash/Bank Account is credited to record the reduction in main funds.

Step-by-Step Solution

1
Identify the nature of the transaction
The transaction involves restoring the spent petty cash amount by issuing funds from the main bank or cash account to the petty cash box.
Under the imprest system, the petty cash float is topped up periodically by a cash or cheque withdrawal from the main account equal to the total spent.
2
Apply double-entry bookkeeping rules
Debit the receiving account (Petty Cash Account) and Credit the giving account (Cash/Bank Account).
Petty cash is an asset account increasing with cash received, while Cash/Bank is an asset account decreasing as funds are drawn.

Key Concept

Accounting Entry for Imprest Float Reimbursement
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Topics

Petty Cash Book and the Imprest System

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