Maintaining a petty cash book can be simple as long as a person makes sure to keep up on transactions regularly. The petty cash voucher details are then entered in the petty cash book and the voucher filed away in numerical order so that it may be easily located if necessary. The firm may adopt imprest system of maintaining petty cash. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. What are the advantages of the petty cash book answers. Petty cashier is a person, who maintains the petty cash book. Petty cash book helps in making the records of cash transactions uptodate because of division of labor in recording cash transactions. Accounting for petty cash explanation, related controls. 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. It is an accessible, convenient way to pay for small purchases.
Petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers. Businesses operating on a large scale usually maintain a petty cash book to harness the. It is both a book of original entry as well as a book of final entry. Cash book also serves the purpose of book of original entry as well as ledger. The check amount should be sufficient to handle most cash purchases for the time period you choose, but not so large as to encourage theft. Petty cash is an easy to understand and familiar method of paying for company expenses. Petty cash book explanation, format, example, ordinary and imprest. Learn more about petty cash expense management, and decide which system is right for your business. A petty cash book gives management a record of all the little. The following are the main advantages of maintaining a cash book. In a big concern, recording of all transactions in one journal and.
The imprest system reduces the chances of misuse of cash because the float can be immediately. It relieves the cash book and the chief cashier of the burden of recording tiny. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. The advantages of treble column cash book are stated below, time and laborsaving a good deal of time and labor are saved because for maintaining a treble column cash book cash account, bank account and discount accounts are not needed to be prepared in the ledger. There might be a petty cash drawer or box in each department for. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i.
As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced 2. The imprest petty cash float system is an important internal control tool to check cash and its usage or theft. The description of each expenditure is recorded in particulars column but the head of expenditure recorded in divide column the major advantage of maintaining analytical petty cash book is that each payment is not necessary to be posted to the ledger individually. The advantages of petty cash system enumerated are as follows. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. A separate column is allotted for each type of expenditure. What are the advantages of a imprest system for petty cash. Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash. The person who is maintaining petty cash book is called as a petty cashier. Fundamentals of financial accounting chapter 02 at the end of each topic you should be able to. Petty cash book format example definition explanation. Accounting can be done manually or made easier with bookkeeping software and employee expense. The main advantages of imprest system of petty cash are as follows. At the end of a period totals of all heads of petty expenses are transferred to a relevant ledger account.
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. An imprest system of petty cash is used for more control over cash in hand. Petty cash book explanation, format, example, ordinary. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. Petty cash book system are also called as imprest system. Petty cash book definition, types, format, examples. What is the importance of petty cash in a business.
Cash book definition, explanation types and advantages. Advantages and disadvantages of analytical petty cash book. Petty cash book helps in making the main cash book more informative, clean and clear by including only major transactions. All cash transactions are primarily recorded in it as soon as they take. Thus, the book is part of a manual recordkeeping system. The petty cash book is maintained by separate cashier known as petty cashier. A s the petty cashier has to produce to the chief cashier the petty cash book for inspection, it acts as a healthy check on the petty cashier. Petty cash book 2019, imprest system of petty cash. In almost all businesses, the bulk of transactions related to cash receipts and payments. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Under this system, the chief cashier periodically checks the record of petty cash.
Many expenses of small nature are recorded in petty cash book. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and. The importance of a cash book in accounting bizfluent. Petty cash accounting involves establishing a petty cash policy, setting up a petty cash log, creating journal entries, and reconciling the petty cash account. Study 101 terms accounting 1a ch7 booknotes flashcards. This is recorded as a separate account in the companys general ledger.
Time wastage minimization under this columnar imprest petty cash book petty expenses are not needed to be posted in the relevant ledger account again and again. Forecasting your business needs ahead and planning for purchases and other business miscellaneous will become easier with bookkeeping. The main advantages of petty cash book publish your article. There are two primary types of entries in the petty cash book, which are a debit to record cash received.
Petty cash is the small cash reserves that businesses keep on the. A petty cashier makes a detailed analysis of petty payments and records under suitable heads, i. Cash book definition, types accounting format of cash book. What are the advantages of using the imprest system. As head cashier check the accounts of previous month and gives advance for the coming month, does, errors if any are reduced. Petty cash is also the title of the general ledger current asset account that reports the amount of the companys petty cash. In a modern economy in which technology is a staple in corporate accounting, this journal resembles more an electronic repository of liquidity transactions than a physical, classic book. A s the petty cashier has to produce to the chief cashier the petty cash book for inspection. Cash and bank transactions can be recorded in cash book.
Petty cash and the imprest cash float system college. Advantages and disadvantages of analytical petty cash book qs. Note the analysis columns that enable the transaction to be recorded and analysed at the same time. Outgoing cash flows range from vendor and service provider remittances to salary and tax payments. Petty cash book maintains records of all petty payments systematically. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly. Payments in cash of small amounts like traveling expenses, postage, carriage etc. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. Every time when the person who control the bank accountdisbursement to petty cash is able to have a closer internal check on the actual petty cash expenditure incurred. Advantages, disadvantages, and the pex alternative. Most petty cash books are maintained by listing receipts and their purchase purpose. If we do not maintain a cash book and record all cash transactions in the journal, unnecessary time and labor would be required for debiting and. The petty cash book is a document in business used for recording misclenius expenditure this are the unplanned and shallow demands that may arise in the daily running of the business. 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.
What are the advantages of maintaining a petty cash book. Read this article to learn about the types and advantages of subsidiary books. Using imprest, the petty cash of a company is kept at a constant rate. Petty cash book is maintained by the petty cashier. It is possible to find out daily cash and bank balance. Besides maintaining a main or general cash book, many companies also. Petty cash book maintains records of all petty payments analytically. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Petty cash book can be maintained either in a simple or in analytical way. 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. This is the only amount of cash that is not immediately deposited in the bank account after it is. Explain the main forms of business transaction and documentation identify, explain and understand the main forms of accounting record, including. Advantages to using petty cash petty cash is an easy to understand and familiar method of paying for company expenses. 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.
Surprise cash counts must be conducted time to time to ensure the accuracy of the cash balance stated in the petty cash register the amount of petty cash float should not be set too high since petty cash register does not form part of the double entry system, payments made through petty cash are subsequently posted into the cash ledger and the. The imprest system of petty cash is used by most of the companies because of the following advantages. In this book, separate columns are provided for usual head of expenditure. Solved explain the major advantages and disadvantages. Similar to other books of accounts, a cash book also has a debit. Besides maintaining a main or general cash book, many companies also maintain a small cash book known as petty cash book to record small day to day expenditures of the business 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. The preservation of petty cash book does not need particular knowledge of accounting. Cashbook helps in effective cash management as management can know the balances of cash and bank at any time and take the necessary decisions accordingly. The importance of bookkeeping accounting for small businesses.
Petty cash book helps in making the records of cash transactions uptodate because of the division of labor in recording cash transactions. Once you have the basics covered, you need to put money into petty cash. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. Meaning of petty cash book, its importance and advantages.
Petty cash book is maintained to record small expenses such as postage, stationery, telegram. The chief cashier is relieved from the cumbersome work of petty cash disbursement. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. In most cases, the petty cash book is an actual ledger book, rather than a computer record. You should write a check to the custodian to initially establish the fund. Petty cash book a petty cash book is shown on the next page. A petty cash book records small cash transactions in separate accounts. 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. These petty cash expenses are recorded in the petty cash book.
Petty cash is often used to pay for postage, small office supplies, and other small purchases. As the petty cashier has to account for his expenses, before he can draw further sums. The petty cash book accounts for the cash spent on this short term arising needs of the company and it is necessary for accountability for the expenditure on the. Explain the major advantages and disadvantages of a business owner with minimal accounting experience maintaining the companys books instead of hiring an accountant. Fixed amount is paid to the petty cashier along with the imprest system. Required a state two reasons for maintaining a petty cash book. Subsidiary books are those books of original entry in which transactions of similar nature are recorded at one place and in chronological order. The system is a form of managing petty cash in a business.
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