What is petty Cash book

A Petty cash book is one in which all pretty or small payments made through pretty cash funds are recorded systematically.

Where all cash receipts are paid into the bank and all payments are made by cheques, it becomes necessary to keep another subsidiary cash book called petty cash book for recording petty cash payments.

Advantages of Petty cash book:

The following are the advantages of Petty cash book:

A) Limited amount in the hands of the petty cashier: The head cashier provides the petty cashier with an estimated amount just sufficient to meet the petty expenses of a period.

B) Check on the Petty Cashier: This system acts as a check on the petty cashier because he has to present his petty cash book to the head cashier each time he wants a cheque for the total payments.

C) No scope for misappropriation: Since the sum is small, it does not provoke the person in charge of it or others in the office to misappropriate it.

D) Training for other staff: It trains young staff to handle money with responsibility.

Petty Cash Book

Different Types of Petty cash book:

1) Simple Petty cash book:

The simple petty cash book is written just like a cash book.

The uses of simple petty cash book are:

I) Recording of receipt of petty cash: Any cash which the petty cashier receives is recorded in the left-hand side of the petty cash book.

II) Payment of petty expenses: The payment of any cash for petty expenses made by the petty cashier is recorded on the right-hand side.

2) Analytical Petty cash book:

An analytical petty cash book is a book that contains different columns on the credit side of the book for recording important expenses along with a column for total expenses.

There will be a separate column for each important expenses and there will also be a sundry expenses column for the expenses for which there is no separate column.

There is also a special column for recording transactions relating to ledger accounts I.E real and personal account.

Different systems of Petty cash book:

The following are systems of Petty cash book:

A) Ordinary System of petty cash book: Under this system, a total amount of cash is given to the petty cashier for the purpose of making petty payments.

After spending the whole amount, he submits the account to the head cashier.

The head cashier again hands over some amount to the petty cashier.

B) Imprest Systems of Petty cash book: Under the imprest system, an estimate is made of the amount that is likely to be required for petty expenses for a certain period, say one week or a month.

Such amount is then drawn from the bank and handed over to the petty cashier, to begin with. This amount is known as float.

At the end of the period, say one week or one month, the petty cashier presents the account of his disbursements to the head cashier who issues a cheque for the exact amount disbursed by the petty cashier.

Balancing of the Petty Cashbook: At the end of the time of balancing of petty cash book, alines is drawn right across the figures on the credit side and all the columns are added up.

Then only the analysis columns are closed with a double line, the total column being left open.

The balance of petty cash in hand is ascertained after deducting the total of the payment column in the credit side from the amount received column in the debit side.

This is inserted in the credit column, the book is balanced off and the balance is brought down.




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