PETTY CASH BOOK

Petty Cash Book is the book which is used for the purpose of recording expenses involving small amounts. Besides petty expenses, receipts from main cash are recorded. Petty Cash Book is maintained by Petty Cashier and acts as the Petty Cash Account.

In a business a number of small payments, such as for conveyance, stationery, cartage, etc., have to be made. If all these payments are recorded in the Cash Book, it will become voluminous. Therefore, it is usual for firms to appoint a person as 'Petty Cashier' and to entrust the task of making small payments.

Recording of Petty Cash:- Petty cash given to the Petty Cashier for small payments is recorded on the credit side of the Cash Book as 'By Petty Cash Account' and is posted to the debit side of the Petty Cash Account in the Ledger.

SYSTEM OF PETTY CASH:- Petty Cash Book may be maintained by ordinary system or by imprest system. In case of Ordinary System of Petty Cash, Petty Cashier is given appropriate amount of cash and after spending the whole of that amount, he submits the account to the Head Cashier.

Imprest System of Petty Cash :- Under this system, an estimate is made of amount required for petty expenses for a period (say for a week, a fortnight or a month). The amount so ascertained is given to the Petty Cashier in the beginning of a period. The amount paid by him during the period. Thus, he will again have the fixed amount in the beginning of the new period reimbursed. This amount is called imprest money. This system of paying advance in the beginning and reimbursing the amount spent from time to time is called imprest system.

Advantages of Imprest System of Petty Cash

(i) Control Over Mistakes: The Petty Cash Book is checked by the cashier at regular intervals so that a mistake, if committed, is soon rectified.

(ii) Control Over Petty Expenses: Petty expenses are kept within the limits of imprest since the petty cashier can never spend more than the available petty cash.

(iii) Control Over Fraud: Under this system defalcation of cash can be minimised since the Petty Cashier is not allowed to draw cash as and when he desires.

Types of Petty Cash Books:- Following are the two types of Petty Cash Books:

1. Simple Petty Cash Book

2. Analytical Petty Cash Book.

3. Simple Petty Cash Book: A Simple Petty Cash Book is identical with a Cash Book. Any cash which the Petty Cashier receives is recorded on the left hand side cash column (debit or receipts column) and any cash which he pays out is recorded on the right hand side (credit or payments column). The date and particulars of every transaction is written in the same date and particulars column.

4. Analytical Petty Cash Book: An Analytical Petty Cash Book has two sides; left hand side is used for recording receipts of cash (which will be only from the main cashier) and right hand side, which is used for recording payments. In the Analytical Petty Cash Book, a separate column is provided for recording a particular item of expenditure, i.e., postage, stationery, travelling, advertisement, etc. A column is usually provided for 'sundries' to record infrequent payments. When petty expense is recorded on the right hand side total payment column, same amount is also recorded in the appropriate expense column. At the end of a particular period, analysis (expenses) column are added and posted to the debit side of the respective accounts.

Submitted October 01, 2020 at 06:51AM by mansicocedu https://ift.tt/33joJaD