For this purpose, a petty cashier is appointed by the chief cashier. Petty cash book the cash book as seen above is used for recording all major payments. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. Cash includes currency and coins, although most businesses do not keep much of this type of cash around. How process transactions in the petty cash book for more go to to donate. The book containing the record of all cash passing into and out of a business is called the cash book. A separate column is allotted for each type of expenditure. How to prepare analytical petty cash book in excel spread. In order to pay off the expenses you need to use the payment voucher type and i have explained it in office advances payment article in. For example, the iedunote company decided to increase the petty cash fund. Petty cash book is an accounting book used for recording expenses which are small and of little value, for example, stamps, postage and handling, stationery, carriage, daily wages, etc these are expenses which are incurred day after day. There are two types of cashbooks, and they are the 2column cash book and the 3column cashbook.
The most common examples are the single, two and three column cashbooks, however, it is possible to have multicolumn cash books, such as the petty cashbook, which can be used to provide further analysis of receipts and payments. Definition and explanation of cash book with examples. A cash book is a financial journal in which cash receipts and payments including bank deposits and withdrawals are recorded first in a chronological order ie recorded according to the date of transaction. Do not worry, this post here seeks to explain to you how to use petty cash books, what.
Also included as a part of cash are the balances kept at banking and financial institutions. The credit side consists of several analysis columns. Meaning of petty cash book a petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically. Petty cash book meaning, cash book vs petty cash book. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. This makes the entire petty cash system susceptible to abuse or fraud.
The main advantages of petty cash book publish your article. There are two primary types of entries in the petty cash b. The sum of money so kept in hand generally termed as petty cash and book in which the petty. The receipt of petty cash received, can be recorded in tally. The difference between the total of the debit items and that of the total column on the credit represents the balance of the petty cash in hand.
Excel sheet named petty cashvinayak shinde showing working is attached herewith. In most cases, the petty cash book is an actual ledger book, rather than a. Each payment is recorded on it twice, one on total amount column and next on individual expense column. Peter, your article did not seem to mention petty cash set up as a bank account. Since the petty cash book analysis the expenses into a number of heads of expenses, the name given to it is analytical petty cash book. Petty cash is the small cash reserves that businesses keep on the. A company typically uses petty cash to make small purchases or reimburse employees for minor expenditures. Like a journal, it is the first book which records all the cash transactions of the business. There might be a petty cash drawer or box in each department for. Credit side consists of more analysis columns in the petty cash book. Thus, the book is part of a manual recordkeeping system. Overall, petty cash is a largely outdated and inefficient system. If you let your workers dip in and out of your petty cash reserves, its wise to keep a close eye on whats coming in and.
The office establishes the petty cash fund for paying petty expenses incurred daily. The petty cash book is ruled in the form of the single column cash book with an amount column and addition oat columns for the more usual classes of expenditure. For example, if you bought a screw at the corner hardware store, you might. The petty cash book is a book of vouchers which are made each time an expense is. Petty cash book is a type of cash book that is used to record minor regular. It also acts as a subsidiary book to post all the cash transactions, similar to a cash account in the ledger.
If treated as a part of double entry, then no separate petty cash account is needed. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Small or large companies maintain 2 types of petty cash book for all cash. While convenient for small purchases, it is not a realistic solution for larger expenses. C or cb cash book, j journal, pc petty cash book etc.
Last modified december 17th, 2019 by michael brown. The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below. Petty cash or the petty cash fund is a small amount of cash on hand used for paying expenses too small to merit writing a check. When the petty cashier needs further cash, he makes up the petty cash book and presents it to the chief cashier, who verifies the accounts and gives further amount. Many expenses of small nature are recorded in petty cash book. The main advantages of imprest system of petty cash are as follows.
Its also vital to ensure that you have a sturdy and lockable petty cash box where you keep all the money safe. Petty cash book these are expenses which are incurred day after day. Totals are carried forward from page to page until the end of the periods. A somewhat more useful format is to record all debits and credits in a single. Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque. Petty cash book explanation, format, example, ordinary and imprest. Meaning of petty cash book, its importance and advantages. Subsidiary ledgers are often maintained to facilitate a division of responsibilities within a large account, or to provide a separate record of a particular account. Uses of petty cash book its a cash book used to enter daily petty expenses like cost of stationery, postage and xerox copy and so on. In this video, i will teach you about petty cash book.
Every time a payment is made through petty cash, it is recorded in the petty cash register usually by the cashier. Pl guide further as to once the petty cash ledger ac. I could add details when i reconcile the bank account and create a liability to pay the petty cash account. The additional analysis columns are used to analyze expenditures as they arise. To record such expenses, a different book known as a petty cash book is maintained. Companies maintain two types of petty cash book for all cash transactions of a business. Petty cash book format example definition explanation. Petty cash book definition, types, format, examples. When the cashier requests for reimbursement of petty cash, he creates a petty cash voucher detailing the payments made through petty cash during the.
The cash book and 8 the petty cash book ethaksalawa. Petty cash accounting involves establishing a petty cash policy, setting up a petty cash log, creating journal entries, and reconciling the petty cash account. A petty cash fund is a segregation of an advance of money from a fund to be used for incidental purchases and for explicit purposes explained in. Columnar petty cash book and its preparation process. Read this article to learn about the following types of cash book and its preparation, i. This is so because, as explained later, subsequent checks drawn to replenish petty cash are not debited to petty cash account, but are charged directly to the various accounts for which the petty cash funds have been expended from this petty cash fund the cashier makes such payments as are necessary, recording each one in a book similar to that. As the petty cashier has to account for his expenses, before he can draw further sums. It is another cash book which is maintained, generally, in large business concerns to reduce the burden of main cash book, in which numerous transactions involving petty small amounts are recorded.
Regularly checking the petty cash book is balanced when the money in the fund is low, they have to request that cash be withdrawn from the bank in order to replenish the money that has been paid out. As the petty cashier cannot draw as and when he likes, it prevents unnecessary accumulation of cash in his hand thus the chances of defalcation of cash are minimised. A discount can be explained in brief as the deduction of value from the value of a transaction i. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Adams petty cash 2part carbonless receipts book, 2. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to the. Petty cash balance after reimbursement reverts to back to the level of the float.
Accounting can be done manually or made easier with bookkeeping software and employee expense. But i still cant work out how i would then reduce that liability and a transaction to the petty cash account. Thus, every time petty cashier begins the next period with the same amount of float, under this system, petty cash fund is reimbursed for the petty expenses incurred is called impress systems of the petty cash book. So, the book, wherein day to day petty expenses for a particular period of a business concern, are recorded in chronological order of dates is called petty cash book. Before the rise in the use of credit cards and charge cards, nearly all companies used petty cash accounts to allow employees responsible for purchasing small supplies to do so with minimal hassle. Under imprest, petty cash book system petty cashier submits a statement of expenditure to the head cashier at an interval of a certain period and thereafter receives funds from him for further expenses. Petty cash book can be maintained either in a simple or in analytical way. Briefly state how the cash book is both journal and a ledger. Petty cash is also the title of the general ledger current asset account that reports the amount of the companys petty cash. This is the simplest form of cash book and is used in businesses where payments are made and received mostly in. The date of transaction is written in this column in two linesin the first line.
As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. Here we discuss the format of petty cash book, types of petty cash systems. Accounting for petty cash explanation, related controls. In this column the name of the opposite account is written. Petty cash book definition the petty cash book is defined as relatively small amount of cash kept at hand for making quick payments for miscellaneous small expenses in the business concern. A cash book is that unique book of accounts which fulfils the objective of both, a journal and a ledger. How the imprest system of petty cash book works your. Petty cash book is maintained by the petty cashier. Ncert solutions for class 11 financial accounting recording of transactionsii short answer type questions q1. Transactions are recorded directly from source documents in the cash book, so there is no need to record transactions in the journal book. In most cases, the petty cash book is an actual ledger book, rather than a computer record. But, in every business a number of petty small payment like that for postage, carriage, stationery, entertainment, cartage, conveyance etc.
In the petty cash book not part of the double entry bookkeeping system, the cash received to replenish the fund of 65 is recorded and the imprest fund is now back to its original cash amount of 100. Each month, accountants or other employees will need to balance petty cash and replenish the funds. In this video ive explained about petty cash book which is a ledger kept with the petty cash fund to record amounts that are added to or subtracted from its balances. Petty cash book 22 general journal 25 month end calculations 27 3 ledgers 32 sales debtors ledgers 33. Most businesses allow their employees access to a petty cash fund to make small purchases that would be a hassle to put through company accounts individually. It is another cash book which is maintained, generally, in large.