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Petty Cash Book

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What is a Petty Cash Book?

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The petty cash book is the record of petty cash expenditures that are sorted by date. In most cases, this petty cash book is a ledger book, and not a computer record. This book is a part of the manual record-keeping system in the accounting department. There are basically two primary types of entries in the petty cash book –

  • Which is a debit to record the cash that is being received by the petty cash clerk, which is usually in a single block of cash at infrequent times.

  • A large number of credits which reflect the cash withdrawals from the petty cash fund, which are such transactions as payments for meals, flowers, office supplies, stamps, and henceforth.

Imprest System of Petty Cash

The imprest system of petty cash means the general ledger account. Petty Cash is to remain dormant at a constant amount. Suppose, the amount of petty cash is Rs.1000, then the Petty Cash account will report a debit balance of Rs.1000. This Rs. 1000 is known as the imprest balance. If the Rs. 1000 is sufficient for the organization's small disbursements, then the general ledger account Petty Cash will never be debited or credited once more.

As the currency and coins on hand get decreased, then the petty cash custodian will request a check to replenish the coins and currency that were being disbursed. Since the requested check is drawn on the business's checking account. The Cash account is to be credited and the debit will go to the expense account as indicated by the petty cash receipts, like the postage and supplies expenses. 


Types of Petty Cash Book

Generally, there are two types of Petty Cash Book:

  1. Columnar Petty Cash Book.

  2. Imprest Petty Cash Book.

Columnar Petty Cash Book

To vividly know about Columnar Petty Cash Book, we will point the following statements:

  • Columnar petty cash book consists of many money columns which record daily expenditures. This Petty Cash Book has two sides – the debit side and the credit side.

  • The particulars of cash receipts and expenses are written together in a single column which is known as the particulars column and the other column is used for writing the dates of both debit and credit.

  • In the debit money column, the amount of the cash is received from the head cashier which is written.

  • The credit side also contains many money columns as per the requirement for recording the expenses and then the expenses are recorded in a classified way in a chronological manner.

  • To compute the total amount of money that is spent the total money column is required on the credit side for recording all the expenses.

Imprest Petty Cash Book

Details about Imprest Petty cash book can be enunciated in the following points:

  • As mentioned earlier, Imprest Petty Cash Book contains many money columns which are recorded on the credit side and one money column on the debit side and a particular column, and a date column which is also similar to that of the columnar or to the analytical petty cash book.

  • Under this system of petty cash book, the head cashier provides a fixed amount of money to the petty cashier in advance for making the expenditure for a particular period.

  • At the end of the period, the petty cashier submits to the head cashier a statement of expenditures that are incurred by him.

Example

On 1st of Jan. 2004 head cashier paid Rs. 5000 to the petty cashier in advance. In January, the petty cashier spent Rs. 4000 and submitted a statement of expenditure for the spent amount to the head cashier.

The head cashier then pays him again Rs. 4000 for meeting the expenditure of February.

The petty cashier starts his petty cash book on 1st February with a cash balance of Rs. 5000.

In this way, at the beginning of every month, the petty cashier will possess Rs. 5000 as an interest fund to meet up the daily expenditures.

FAQ (Frequently Asked Questions)

1. Is the Petty Cash Book an Important Part of Accounting?

Ans. The petty cash book is a record of the petty cash expenditures, which are sorted by date. Generally, the petty cash book is a real ledger book that is a part of the manual record-keeping system.

A petty cash book is quite necessary to create and facilitate small payments in a business or in organizations. It places and recognizes the expenditure for items such as postage and stamps, bus fare, and stationery expenses as well. The petty cash book is meant to meet the day-to-day expenses and thus is entrusted in the hands of a petty cashier.

2. What is a Ledger Book?

Ans. A ledger is a book that contains accounts in which the accounts are classified and summarized information from the journals and is posted as debits and credits. This is also called the second book of entry. The ledger contains the information which is required to prepare the financial statements. A ledger represents the record-keeping system of the financial data of the company.

3. What is the Use of Petty Cash Fund?

Ans. Petty cash fund is to make the payments for small amounts that are less material, such as the postage, small repairs, or day-to-day supplies. A petty cash account is an imprest account, hence, it is only debited when the fund is established or increased in the amount. The fund works on the imprest system, where there is an initial amount of money that is put into an account, that is drawn upon for a specific purpose. When the same account goes below a certain specified amount, the system is used up.