Petty Cash Book

This book (or page of your spreadsheet) records expenditure paid by:

– cash

– personal, rather than business, cheque

– credit card (whether business or personal)

The petty cash book is written up like:

  1. In the first column write the date of payment.
  2. In the next column write a description of the item.
  3. Next allocate each item a separate number. This should actually be written on the receipt for the payment and also in the third column. This gives the cross-reference in cash you ever need to find the receipt e.g. If you have an Inland Revenue or customs and excise investigation. File all the receipts in number order to make them easy for you, us and the tax authorities to find. This can be done by just sticking them on a bit of paper and putting them in an A4 ring binder. You will save money and time in the long run by doing this.
  4. The next column is the total column. This is the amount you actually paid, whether in cash, or from your personal bank account or by credit card.
  5. The next column shows the amount of vat included in the payment. If the amount of VAT paid is not shown on the receipt or invoice you have got and it has a VAT on it you can calculate the VAT by taking 1/6 or 20/120 of the total value if is for less than £100. If it is clear no VAT was paid e.g. because there is no VAT number on the receipt then the VAT column should be left blank.
  6. The net expense should then be analysed between the remaining columns as appropriate for your business. Some suitable headings are shown on the example.
  7. Finally, rule underline the bottom line for each month and up the columns. To check this make sure the sum of the total paid column equals the total of all the other columns added together. If it does all the addition is correct.

What does the petty cash book look like?

Something very much like this.

Further points to note:

  1. You should not worry about a “balance” of petty cash unless you maintain a separate tin with a float. If you do this you will need to keep two separate petty cashbooks. One will show expenses paid out of your pocket, personal cheques and credit cards, and the other will show expenses paid out of your pocket, personal cheques and credit cards, and the other will also need to show cash payments made with cash from the tin only. That book will also need to show all money which you put into the tin and the balance as petty cash book at any one time should equal the balance in the petty cash tin. This is usually not possible in a very small business as the balance is always in your pocket/purse.
  2. Note that there are a lot of descriptions given in this section. This is because petty cash
    receipts are often rather scrappy and give little detail. Its best to make a note when you can remember what you brought rather than be challenged about it later on and have no clue what it was about.
  3. here are lots of headings that can be used in both the Bank Payments Book and Petty Cash Book to analyse expenses. The examples only use a few headings to get things on the page. In practice, especially if you are using a spreadsheet, use as many as you think appropriate. Possible headings might be:- Lots of categories of materials costs to suit your business e.g.:
    – Design
    – Typesetting
    – Engineering supplies
    – Photography
    – Ingredients
    – Building materials
    – And so on and so on, so long as the heading is useful for you
    – Rent
    – Rates
    – Service charges
    – Water
    – Electricity and gas
    – Insurance
    – Cleaning
    – Repairs and renewals
    – Small tools
    – Maintenance contracts
    – Postage
    – Stationery
    – Telephone
    – Mobile phone
    – Fax
    – E-mail
    – Books magazines and research
    – Subscriptions
    – Office expenses and sundry costs
    – Motor expenses
    – Motor fines
    – Car hire and leasing
    – Travel
    – Hotel
    – Subsistence
    – Entertaining
    – Staff entertaining
    – Gifts
    – Advertising
    – Marketing
    – Exhibition costs
    – Samples
    – Legal fees
    – Accountancy
    – Book keeping
    – Bank charges
    – Bank interest
    – Hp payments
    – Lease payments
    – Credit card interest
    – Credit card charges
    – Purchase of new equipment
    – Salaries(of employees,not your self)
    – PAYE and national insurance(for employees)
    – Canteen costs
    – Recruitment
    – Temporary staff
    – Sub contractors
    – Payments to your self
    – Personal tax and national insurance paidIf in doubt always use more columns, not less if you can. But always make sure you keep the columns in the same order each month or it will take you forever to remember what to do with things, and we will have the same problem.
  4. Some things just aren’t worth claiming in detail. If your business mileage is small for example, it is rarely worth the bother of keeping track of all your motor expenses. This is because if you do you’ll have to keep a log of your private and business mileage to prove what proportion of the total expenses you can claim for business purposes. As there is so much work involved in doing this it can be easier to claim 40p per mile for the first 10,000 miles and 25p a mile there after (these figures apply from April 2002 on).

What does the petty cash book tell you?

The petty cash book tells you:

  1. Who you have paid in cash or by personal cheque or credit card
  2. What you have brought
  3. The total VAT that you can reclaim in respect of these expenses from Customs and Excise for a quarter. To find this out add up the VAT column for the quarter covered by your VAT return.

What doesn’t the petty cash book tell you?

It doesn’t say how much cash you’ve got. But unless you’re running cash business this isn’t a real problem, because any cash the business has got is in your pocket anyway.

For further information, please contact us on 03332 401 333 or email