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. In most cases, the petty cash book is an actual ledger book, rather than a computer record. Petty cash balance after reimbursement reverts to back to the level of the float. It the money taken away out of the cash box by the owners of a business for. A small amount of cash withdrawn from the bank used to buy miscellaneous items, e. Petty cash works on the imprest system, in which there is an initial amount of money put into an account, which is drawn upon for a specific purpose in this case, petty cash. 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. 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.
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. In most cases, the petty cash book is an actual ledger book. Petty cash book explanation, format, example, ordinary and imprest. The employee, who keeps the petty cash book, is called petty cashier. Petty cash is a small amount of cash that needs to be kept in the office for the utilization of daily small expenditures. This method of bookkeeping is a simple record of income and expenses using a manual cash book and calculator, or a spreadsheet in a selfcalculating program such as open office, microsoft excel or quattro pro. Petty cash, also known as imprest cash, is a fund established for making small payments that are impractical to pay by check. When the cashier requests for reimbursement of petty cash, he creates a petty cash voucher detailing the payments made through petty cash during the. A cash book is a type of subsidiary book where cash or bank receipts and cash or bank payments made during a period are recorded in a chronological order. Petty cash funds are often created by a business owner simply writing a business check to cash. Meaning of petty cash book, its importance and advantages. Youll also want to purchase a lock box for the cash and receipts.
A petty cash book records small cash transactions in separate accounts. In contrast, if you hold back some cash from the deposit to use for petty cash in other words the money is never taken to the bank at all or you take the full deposit to the bank but just have the teller give you some cash back, these types of transactions typically do not show up on your bank statement so you would want to be able to. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Petty expenses are recorded in petty cash book in chronological order of dates instead of the cash book.
Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal expenditures of the business which is not related to the direct line of the business. Start a petty cash fund by writing a check to petty cash. Petty cash book definition petty cash book is maintained to record small expenses such as postage, stationery, telegram. Petty cash is a small amount of cash on hand used for paying expenses too small to merit writing a check. For proper maintaining of cash books, preventive measures are taken to avoid fraud. In almost every organization petty cash is an integral part of the accounting function and mostly taken care of by accounts personal only. 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. The establishment of a petty cash system begins by making out a check to cash, cashing it, and placing the cash in a petty cash box. Accounting can be done manually or made easier with bookkeeping software and employee expense. When an individual takes money out of the petty cash fund, he notes it in the petty cash ledger. When a business doesnt provide access to company credit cards, or employees would rather not wait to be reimbursed for purchases, using petty cash is a simple alternative. The theory is the same if we are working with the debit side of the cash book. 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.
Credit side consists of more analysis columns in the petty cash book. 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. The petty cash book is a recordation of petty cash expenditures, sorted by date. The treasurer of the company has not taken a vacation for over 20 years. Define and explain a three column cash booktreble column cash book.
It includes a unique number, the date the money was withdrawn, details of the transaction, and total amount withdrawn. Chapter 1 bk book 2 introduction to cash book ac100 studocu. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. The petty cash is a small amount of discretionary finances in the business firm of cash. Format of the petty cash book bookkeeping debits and credits. Petty cash vouchers are sometimes also called petty cash receipt. The payment of a purchase invoice when a cash discount is taken includes a debit to accounts payable, a credit to purchase discount and a credit to cash. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well.
Every time a payment is made through petty cash, it is recorded in the petty cash register usually by the cashier. The primary book where transactions regarding cash receipts and payments are recorded in a chronological order of dates with explanations and balance is drawn at the end of the day or a particular period is called cash book. Petty cash book saves time because each payment under particular head is not posted into the ledger separately. Petty cash should be properly controlled with a petty cash log and accurately entered into the bookkeeping system in exactly the same way you would maintain a bank account. The petty cash or the petty cash fund is a small amount of cash an organization or company keeps on hand in order. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side.
Format of the petty cash book free download as word doc. Petty cash book format example definition explanation. 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. In almost all businesses, it is found necessary to keep small sums of ready money with thecashier or petty cashier for the purpose of meeting small expenses such as postage, telegrams, stationary and office sundries etc. Petty cash fund is a relatively small amount of cash that businesses keep on hand for the purpose of small transactions such as providing change to customers, postage expenses, highway tolls etc.
Accounting for petty cash explanation, related controls. It will be taken into account by means of adjusting entry which is as follows. 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 small expenditures are usually paid using coins and currency notes rather than checks. Petty cash book helps in making the records of cash transactions uptodate because of division of labor in recording cash transactions. Cash book contains cash transactions passing into and out of a business. A petty cash voucher is an accounting term used to describe the form that is used to record the transactions taken from a petty cash fund. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Here all the cash and bankrelated transactions are recorded along with the discount on sales or purchase of goods. When the account goes below a certain specified amount, the system is replenished. Credit cash is withdrawn from the business and taken by the owner. If you are use cash from the days receipts for small expenses, must sure to accurately record all cash taken from the cash register and prepare a cash sheet at the end of the day to help control cash paid out of the register.
A separate column is allotted for each type of expenditure. A cash book is the record of all the business transactions in the form of. Cash book in accounting the cash book is a chronological record of the receipts and payments transactions for a business. It is an accounting book used for recording expenses which are of small and of little value. Petty cash is a small amount of cash that any business can keep on their premises in a lockable container. The purchase can then be made for the business and any money left over can be taken back to the petty cash fund. 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. It is an accessible, convenient way to pay for small purchases. While petty cash is a relatively small amount of money, it can be easily stolen or abused if you dont handle it right.
Petty cash accounting involves establishing a petty cash policy, setting up a petty cash log, creating journal entries, and reconciling the petty cash account. The format of a triple column cash book is given below. Thus, the book is part of a manual recordkeeping system. In addition, amounts in the other accounts debit amount column would also be posted as debits to those accounts. To account for petty cash, create a transaction log that covers the date, the person who used the petty cash, a description of the transaction, and any other deposits or expenses.
In such transactions, the use of checks is time consuming, costly or illogical. Definition and explanation of cash book with examples. This is used whenever cash is withdrawn from the petty cash fund. Examples include postage due, reimbursement to employees for small purchases of office supplies, and numerous similar items. Petty cash book is the accounting book that is used for the purpose of recording. Petty cash book maintains records of all petty payments systematically. Petty cash is an easy to understand and familiar method of paying for company expenses. Petty cash book definition, types, format, examples imprest and. What are the advantages of the petty cash book answers. Well be receiving money from customers for cash sales which need to be analysed into the value of the net sales and the vat. There are two types of cashbooks, and they are the 2column cash book and the 3column cashbook. For this purpose, a petty cashier is appointed by the chief cashier. And its cheap because you do not have to invest in bookkeeping software. These are expenses which are incurred day after day.
Debit the withdrawal of cash by the owner for personal use is placed on a temporary drawings account and reduces the owners equity. Petty cash meaning, examples accounting for petty cash. The triple column cash book is a compact form of cash book in which all the three columns, i. Petty cash fund definition journal entries example. Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system.