Petty cash book can be maintained either in a simple or in analytical way. It ensures that funds are being used appropriately, and its an important internal control for fraud prevention. Also known as a two column cash book, a double column cash book is the one which has a bank column in addition to the regular cash column. This is the maximum amount of cash that can be held at any time. 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. Definition and explanation of cash book format, advantages. A petty cash book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure. Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system. Meaning, importance, steps of cash control explained differences between transaction and event in accounting. A small amount of cash kept on hand by a business for incidental expenses. 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. In this book, separate columns are provided for usual head of expenditure. Explain the meaning, need and importance of bank reconciliation statement.
Petty cash is also the title of the general ledger current asset account that reports the amount of the companys petty cash. Entries in the cash book are then posted into the general. It is another cash book which is maintained, generally, in large business. This format makes it easier to record petty cash activity in the general ledger. A petty cash is a cash book used to enter all small or petty expenses obtained. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory. When the cheque is issued, the cashieraccountant of the business enterprise records this transaction on the credit side of the cash book under the bank column immediately. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. Petty cashier is a person, who maintains the petty cash book. 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. Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel, newspapers, cleaning, pins, and causal. Petty cash, also known as imprest cash, is a fund established for making small payments that are impractical to pay by check.
It is also referred as threecolumn cash book format and it is most exhaustive form which has three columns of money on both receipt and payment sides and record transactions pertaining to the cash, bank and the discounts. Cash payment cannot be proved if the same is not settled after taking proper shreds of evidence into the account. 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. Check your understanding of a petty cash fund in this worksheet and quiz.
The is only one money column on the debit side and all sum received from time to time by the petty cashier from the chief cashier are entered in it. It is both a book of original entry as well as a book of final entry. Each entry in the petty cash book should include the date, the amount, and what was purchased with the petty cash. Petty cash financial accounting simple book production. Petty expenses are recorded in petty cash book in chronological order of dates instead of the cash book. Article shared by while recording the transactions in petty cash book if all the expenses are analyzed and entries are recorded in cash book on the basis of this analysis such petty cash book is called analytical petty cash book. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. This type of cash book usually uses the imprest system. It is a special book that will record only one type of transactions cash transactions. Sep 30, 2019 overall, petty cash is a largely outdated and inefficient system. Hence a petty cash voucher format shall be created to put evidence in the process and shall be signed by the receiver of cash at the time of payment. These expenditures refer to the cash expense of newspapers, payment for the employee meals, team parties budget, employee farewell expenses, stamps, postage and handling, stationery. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and postage.
These tools can be used to gauge your knowledge of what these funds can. For this purpose, a petty cashier is appointed by the chief cashier. 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. 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. To maintain internal controls, managers can use a petty cash receipt, which tracks the use of the cash and requires a signature from the manager. 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. The employee, who keeps the petty cash book, is called petty cashier. Differences between cash balances of bank and cash book. A petty cashier makes a detailed analysis of petty payments and records under suitable heads, i. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. Petty cash book is an accounting book used for recording expenses which are of small and of little value. The information in your petty cash book is part of a larger accounting system that explains your. The most common way of accounting for petty cash expenditures is to use the imprest system.
Petty cash book definition, types, format, examples imprest and. How the imprest system of petty cash book works your. Here we detail about the three types of cash book, i. The imprest system is an accounting system designed to track and document how cash is being spent. Petty cash book is maintained by the petty cashier. The petty cashier of john and james company paid cash for the following expenditures during march 2018. In an organization thousands of cash transactions occur in a year and journalizing them all is tedious work. By keeping track of all petty cash transactions no matter how petty you have records to back up deductions for those small business expenses.
The amount of petty cash also known as the petty cash fund varies by company or organization. The book in which all cash transactions either cash is received or paid are primarily recorded according to dates, is called cash book. This format is an excellent way to monitor the current amount of petty cash remaining on hand. May 28, 2019 however, failing to hold employees accountable for petty cash may encourage theft or inappropriate use of company resources. Create the guidelines that will clarify how your organization will handle its petty cash.
A petty cash book is a record of smallvalue purchases before they are later transferred to the ledger and final accounts. Jul 16, 2019 the most important part of a petty cash system is the documentation of each transaction. When an individual takes money out of the petty cash fund, he notes it in the petty cash ledger. 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. These small expenditures are usually paid using coins and currency notes rather than checks.
There might be a petty cash drawer or box in each department for. The intent of this activity is to see if there have been any undocumented disbursements. Definition, examples, how to prepare a trial balance. Petty cash reconciliation is the process of verifying transactions that involve petty cash funds. Accounting for petty cash explanation, related controls and. Summary petty cash is small in amount but big in complexity. Fixed amount is paid to the petty cashier along with the imprest system. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. Types of petty cash book in accounting with diagrams and examples 7 different types of journal book. Petty cash is the small amount of cash that is kept on hand by a company to pay for minor, inexpensive purchases during the normal course of operations.
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. Relatively small amount of cash kept at hand for making immediate payments for miscellaneous small expenses. Petty cash is a small amount of money, but it adds up quickly as its replenished. Similarly, when cash is paid out the same is recorded on the credit or right hand side of the cash book. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to the. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. 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. There are two primary types of entries in the petty cash b. Define the purpose and use of a petty cash fund, and. A record of expenditure from a petty cash fund for which a receipt was not received. Petty cash book explanation, format, example, ordinary and imprest. What is the purpose of maintaining a petty cash book. Petty cash vouchers are used to maintain financial control of petty cash accounts, preventing abuse or.
Petty cash is a small amount of cash that is kept on the company premises to pay for minor cash needs. With an imprest system, accountants or bookkeepers track petty cash in the petty cash book. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. This makes the entire petty cash system susceptible to abuse or fraud. Such payments are generally handled by a petty cash imprest system whereby an amount of float is fixed. The establishment of a petty cash system begins by making out a check to cash, cashing it, and. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Cash book definition, example and format of cash book. While convenient for small purchases, it is not a realistic solution for larger expenses.
Examples include postage due, reimbursement to employees for small purchases of office supplies, and numerous similar items. Most companies set up a special fund called a petty cash fund for small purchases and office expenditures. Cash book definition, types accounting format of cash book. Petty cash definition is cash kept on hand for payment of minor items. Manage your business expenses anytime, anywhere with debitoor invoicing software. The cash book is a chronological record of the receipts and payments transactions for a business. Meaning of petty cash book, its importance and advantages. What does it mean to replenish the petty cash fund. How are single, double and triple column cash books written. The bookkeeper records the amount allocated to the petty cash fund in the petty cash. A petty cash fund is an amount of cash that a business uses to make small, miscellaneous purchases. Format of the petty cash book bookkeeping debits and credits. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. The most common example of an imprest system is the petty cash system.
Here we detail about the eleven major causes of difference between cash balances of bank and cash book. Mar, 2018 the petty cash book is a formal summarization of petty cash expenditures, sorted by date. 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. Petty cash definition of petty cash by merriamwebster. Petty cash funds are maintained to provide a company with fast access to small amounts of cash for minor, nonroutine purchases. Petty cash is the small cash reserves that businesses keep on the. Its also vital to ensure that you have a sturdy and lockable petty cash box where you keep all the money safe. Also, since most petty cash custodians are not trained as accountants, they may incorrectly record disbursements. Just like the other type of books, it records receipts from cash and bank on the left side and payments on the right side. Petty cash management is a recordkeeping system to track the use of petty cash funds. Define the purpose and use of a petty cash fund, and prepare. Cash book is a book of original entry in which transactions relating only to cash receipts and payments are recorded in detail. Petty cash book format example definition explanation.
Such disbursements are a common problem in petty cash, where there is a high risk of fraud. The primary bookkeeping record in singleentry bookkeeping is the cash book, which is similar to a checking account register in uk. Explain the meaning of cash book, pass book, and petty cash book. At times, every business finds it convenient to have small amounts of cash available for immediate payment of items such as delivery charges, postage stamps, taxi fares, supper money for employees working overtime, and other small items. Examples of these payments are office supplies, cards, flowers, and so forth. 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. Businesses generally keep small amounts of cash to meet small miscellaneous payments such as entertainment expenses and stationery costs.
Format of petty cash book the extreme left column of the petty cash book is to record the receipts of cash, then in the date column, dates on which transaction took place are recorded. Discuss the causes for difference between the balances of pass book and cash book. A petty cashier receives a fixed amount of money from the head cashier with which he meets petty expenses of a certain period and records in chronological order of dates in the petty cash book. Documenting transactions is the way a business documents business expenses for tax purposes. Sep 19, 2019 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. Petty cash meaning, examples accounting for petty cash. Petty cash is stored in a petty cash drawer or box near where it is most needed. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel, newspapers, cleaning, pins, and causal labor etc. Petty cash book definition, types, format, examples. Simple cash book contains only one amount column on each side debit and credit for recording cash receipts and cash payments. In most cases, the petty cash book is an actual ledger book, rather than a computer record. The chief cashier is relieved from the cumbersome work of petty cash disbursement. For smallscale business, simple petty cash book is sufficient but on a medium or large scale business number of petty expenses increases hence it is desirable to have the separate record for each type of petty.
The cash book can be maintained properly as petty transactions are maintained separately. Require that employees maintain a running petty cash log for every transaction, including receipts. For example, if you bought a screw at the corner hardware store, you might note whether. The most important part of a petty cash system is the documentation of each transaction. Do the initial setup that includes appointing a custodian, obtaining a cashbox, and training staff. Thus, the book is part of a manual recordkeeping system. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. A petty cash transaction is one in which an employee or business owner takes money out of the petty cash fund for the purpose of buying something for the business. Variation on the petty cash book is to maintain it as a spreadsheet, where each item is recorded in a specific column that is designated for a particular type of receipt or expense. General cash book is subdivided in the single column, double column, and treble column cash book. How the imprest system of petty cash book works your business.
The advantages of petty cash system enumerated are as follows. A separate column is allotted for each type of expenditure. A petty cash book is a ledger kept with the petty cash fund to record amounts that are added. To combat this risk, keep the petty cash in a locked filing cabinet or cash box. These are expenses which are incurred day after day. Petty cash is often used to pay for postage, small office supplies, and other small purchases. Petty cash transaction a petty cash transaction is one in which an employee or business owner takes money out of the petty cash fund for the purpose of buying something for the business. Cash book contains cash transactions passing into and out of a business. 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. It should be used in conjunction with procedural information, resources, and forms, which outline the application of this policy and may be found on the petty cash administration section of the gateway to financial activities website fingate. The cash book is updated from original accounting source documents, and is therefore a book of prime entry and as such, can be classified as a special journal unlike other special journals such as the purchases journal or the sales journal, the cash ledger book records debit and credit entries. The petty cash book is defined as relatively small amount of cash kept at hand.