Meaning of petty cash book, its importance and advantages. Top 3 types of cash books with specimen article shared by. In the company, the petty cash book is usually maintained by the administrative department of the company as the accounts departments are usually occupied by the larger business transactions and also the admin department is only responsible for such kind of expenses. Cash control is an important part of business as it is required for proper cash management, monitoring and recording of cash flow and analyzing cash balance. Accounting for petty cash explanation, related controls. To record such expenses, a different book known as a petty cash book is maintained. The person who maintains petty cash book is custodian while. There are two primary types of entries in the petty cash b. For this purpose, a petty cashier is appointed by the chief cashier.
Ppt petty cash book powerpoint presentation free to view. How the imprest system of petty cash book works your business. The primary bookkeeping record in singleentry bookkeeping is the cash book, which is similar to a checking account register in uk. 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. The person who is maintaining petty cash book is called as a petty cashier. In fact, when a cash book is maintained separately, there is no need to keep a cash account in the ledger.
A petty cash fund will undergo periodic reconciliations, with transactions also recorded on the financial statements. 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. Similarly, when cash is paid out the same is recorded on the credit or right hand side of the cash book. Thus, the book is part of a manual recordkeeping system.
You can find the questionsanswerssolutions for the chapter 4 of cbse class 11 accountancy in this page. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. All cash transactions are recorded in the cash book. When the account goes below a certain specified amount, the system is replenished. These are expenses which are incurred day after day. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check.
Cash book is a book of original entry in which transactions relating only to cash receipts and payments are recorded in detail. Recording of transaction in cash book and journal with. A petty cash system is a set of policies, procedures, controls, and forms that a company uses to dispense cash for various miscellaneous needs, such as office supplies and services. It is an accessible, convenient way to pay for small purchases. Cash book accounting helps to advance in their agenda, perform tasks and lay the foundation for success. It is a special book that will record only one type of transactions cash transactions. Recording of transaction in cash book and journal with specimen. 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. It also serves the purpose of a ledger account and therefore, the cash account and bank acccount are not maintained in the general ledger. These types of expenditures occur in government offices frequently. For all purposes, a cash book is treated as a cash account, i. The amount of petty cash also known as the petty cash fund varies by company or organization. This has been a guide what is cash book and its definition. There might be a petty cash drawer or box in each department for.
Youll also want to purchase a lock box for the cash and receipts. Cash book the cash book is a ledger in the sense that it is designed in the form of a cash account and records cash receipts on the debit side and cash payments on the credit side. When an individual takes money out of the petty cash fund, he notes it in the petty cash ledger. Besides maintaining a main or general cash book, many companies also maintain a small cash. 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. It is easy to set up and will save you from writing a lot of small checks or using your personal funds. Petty cash book is the accounting book that is used for the purpose of.
Cash book definition, types accounting format of cash book. By documenting expenses with receipts and confirming that the cash balance is maintained, the petty cash system is that it helps monitor how the money is being spent and protects the money from being stolen. Petty cash book definition, types, format, examples. This kind of petty cash book is known as analytical petty cash book.
Usually the deposits into bank accounts maintained by a business firm, withdrawals from such accounts and cheque payments are also recorded in the cash book. Petty cashier meaning in the cambridge english dictionary. Due to the rise of electronic transactions, the imprest system is becoming less common. How to set up and maintain a petty cash account basic. It is the book which is used for the purpose of recording expenses involving small amounts. But, in every business a number of petty small payment like that for postage, carriage, stationery, entertainment, cartage, conveyance etc. Recording of transactions ii petty cash book solutions this page contains the cbse accountancy class 11 chapter recording of transactions ii notes. Meaning, types and importance of petty cashbook srd law notes.
Petty cash book format example definition explanation. Its also vital to ensure that you have a sturdy and lockable petty cash box where you keep all the money safe. 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 book definition of petty cash book by the free. Petty cash book the cash book as seen above is used for recording all major payments.
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. Hence, trader maintains a separate cash book to record small expenses which are repetitive in nature and cannot be paid by cheque. Click here to download all accounting excel templates for rs 199. Here we detail about the three types of cash book, i.
Petty cashier is a person, who maintains the petty cash book. Financial accounting multiple choice questions mcqs page 7. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. The adjusted cash balance per books on october 31 is a. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Click here to download simple cash book excel template. The person who maintains petty cash book is custodian while cash book is maintained by cashier.
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. For this purpose petty cash book is to be maintained by such employee. It is rarely used, perhaps thats due to a lack in knowledge of its existence or simply due to a lack of need or desire to use it but saps cash journal functionality can be used to easily process and track petty cash. Like a general cash book, a petty cash book has a debit and a credit side. Petty cash book can be maintained either in a simple or in analytical way. With the help of cash book cash and bank balance can be checked at my point of time. Cash book is considered very important in accounting since it is the ultimate asset of an organization, be it a company, government agency, charity or academic institution. The additional analysis columns are used to analyze expenditures as they arise. Petty cash book may be maintained by ordinary system or by imprest system. To support our effors you can donate a small amount by following this link. Petty cash is an account head under which money is kept in cash in a company. A single column cash book always shows debit balance debit side exceeding credit side because more cash cannot be paid than what we have.
The difference between the total of the debit items and that of the total column on the credit represents the. 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. This makes the entire petty cash system susceptible to abuse or fraud. In case of ordinary system of petty cash, the petty cashier is given a certain amount of cash and after spending the whole of that amount, he submits the accounts to the head cashier. 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. For this purpose, a cheque is given to the petty cashier for a definite sum of money. In an organization thousands of cash transactions occur in a year and journalizing them all is tedious work. Cash book is a subsidiary book which records the receipts and payment of cash. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty cash book explanation, format, example, ordinary and imprest. The petty cash book is ruled in the form of the single column cash book with an amount column and addition oat columns for the more usual classes of expenditure.
It is another cash book which is maintained, generally, in large business. One major advantage of this system is that it saves time. A petty cash fund is a small amount of cash kept on hand to pay for minor expenses, such as office supplies or reimbursements. In this book, separate columns are provided for usual head of expenditure. When the cashier requests for reimbursement of petty cash, he creates a petty cash voucher detailing the payments made through petty cash during the.
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. A separate column is allotted for each type of expenditure. 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. Use saps cash journal functionality to record and process. Petty cash definition of petty cash by the free dictionary.
A small amount of funds used instead of writting a check. It may be maintained by ordinary or by the imprest system. Cash book for class 11th good for online study by ajay chopra. 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. Cash receipt meaning in the cambridge english dictionary. Recording of transactions ii petty cash book solutions. A petty cash account is simply money kept on hand to pay for minor cash items such as stamps, office supplies, tips, parking tolls, etc. Mar, 2018 the petty cash book is a formal summarization of petty cash expenditures, sorted by date. Yet another variation on the petty cash book is to maintain it as a spreadsheet, where each item is recorded in a specific column that is. It is to be noted that the amount of cash in the hands of the petty cashier is a part of the cash balance, therefore it should be included in the cash balance when the latter is shown in the trial balance and the balance sheet. The basic process of setting up a petty cash system is. Petty cash book is maintained by the petty cashier and act as the petty cash book petty cash book 3. In most cases, the petty cash book is an actual ledger book, rather than a computer record.
Cash book helps in effective cash management as management can know the balances of cash and bank at any time and take the necessary decisions accordingly. Cash book records all receipts of and payments in cash. Petty cash book definition of petty cash book by the. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. 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 is an easy to understand and familiar method of paying for company expenses.
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. A petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically. Safes are given a rating specifying the maximum value of cash. A petty cashier makes a detailed analysis of petty payments and records under suitable heads, i. A small amount of cash kept on hand by a business for incidental expenses. Sep 30, 2019 the bigger the company, the harder it is to track outgoing petty cash, change and receipts. Balances in the cash book are taken directly to the trial balance. The petty cashier so appointed for recording the small and petty. When an analytical petty cash book is maintained for recording the petty expenses, it will be practically more convenient to consider the petty cash as a separate account and take cheques issued for the petty cash imprest as a debit to petty cash account and all petty expenses paid as credits in petty cash. Small or large companies maintain 2 types of petty cash book for all cash. The first row is for the company name and second for the title of the template. When cash is received it is entered on the debit or left hand side.
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 accounting involves establishing a petty cash policy, setting up a petty cash log, creating journal entries, and reconciling the petty cash account. Sometimes it may be maintained on nonimprest system. Petty cash book meaning, cash book vs petty cash book. 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. Petty cash book definition, types, format, examples imprest and. Dec 14, 2019 cash flow is the net amount of cash that an entity receives and disburses during a period of time.
It should also be kept in mind that petty cash book is not like the cash book. In big business apprehensions, the petty cash book is maintained in analytical form, with a detach column for each standard item of expense and a column for total. Read this article to learn about the recording of transactions in cash book and journal. What is the production insurance policy limit for the amount of cash that can be kept in the company premises and does the policy also require that the money is kept in a safe. 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. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs.
Petty cash is the small cash reserves that businesses keep on the. The cash book is balanced in the same way as a ledger account. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory. Cash book definition, example and format of cash book. The definition of petty cash book group members power point excel conclusion p. To verify the accuracy of the cash book, it should be balanced daily which may be shown in the cash book with red pencil. The cash book is maintained in the form of a ledger account, the receipts being put on the debit side and the payments on the credit side. A positive level of cash flow must be maintained for an entity to remain in business, while positive cash flows are also needed to generate value for investors. Every time a payment is made through petty cash, it is recorded in the petty cash register usually by the cashier. A traditional definition of internal control specifically includes all of the following features except. Petty cash is also the title of the general ledger current asset account that reports the amount of the companys petty cash. A petty cash book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure. For most businesses, these downsides of using petty cash far outweigh the advantages. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well.
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. Dec 23, 2015 im sure garrick saito would explain it well. Petty cash book the petty cash fund is an amount, which is maintained by the government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. Control over cash balance and cash payments will be lost. Petty cash balance after reimbursement reverts to back to the level of the float. The following financial accounting mcqs are collected from different past papers and from accounting mcqs bank. Two types of petty cash book maintained by small or large companies for easy, quick and accurate recording of all cash transactions.
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