Petty cash books have both debit and credit side and it records all the receipts on the debit side and all payments on the credit side just like a general cash book. Under imprest, petty cash book system petty cashier submits a statement of expenditure to the head cashier at an interval of a certain period and thereafter receives funds from him for further expenses. Under the imprest petty cash system as the totals of different heads of expenditures are posted in ledger accounts after a certain period, the workload of a cashier is minimized to a great extent.
Instead, at the time of replenishing the fund, every expenditure is taken into consideration. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. For this purpose, he is given a small amount and a separate book to record these small payments. Average acceleration is the object’s change in speed for a specific given time period. Similarly, payment is restricted out of this fund for some heads of expenditure such as payment of the short-term loan to employees.
Analytical Petty Cash Book
A simple petty cash book looks like a cash book with two main columns (left for receipts & right for payments). 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. Under imprest system, a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists of a week or month. At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier.
From the following information please show an analytical petty cash book (using the Imprest system) for the 1st week of Feb YYYY. From the following information please show a simple petty cash book for the 1st week of Feb YYYY. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and postage. A petty cash is a cash book used to enter all small or petty expenses obtained. For example, the iEduNote company decided to increase the petty cash fund from $500 to 700.
The petty cashier is always assumed to hold cash equal to the imprest account in the form of actual cash or paid-up PCVs. Record the following transactions in an analytical petty cash book for the month of January 2019. Record the following transactions in a simple petty cash book for the month of January 2019. At the end of the period, the petty cashier submits the statements covering petty expenditures to the chief cashier. The petty cashier submitted the below expenses with their respective amounts for the current period amounting to 900.
Example of an Analytical Petty Cash Book
Money spent on purchasing assets or payment of debt is recorded in separate columns known as ledger columns. Thereafter total of money columns and the total of all expense columns of the credit side are drawn. This means any cash that the petty cashier receives is recorded on the left-hand side (debit side) of the book whereas any cash that is paid is recorded on the right-hand side (credit side). The date, along with the particulars of the item is recorded in chronological order. This column is used for expenses that are insignificant and do not fall under any other columns of commonly occurring expenses in the analytical 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
concern.
In all businesses, some payments are made by check for better control over cash. However, for the payment of small expenditures (e.g., stationery, travel, postage, and newspapers), paying by check is unreasonable. The chief cashier records petty cash advances to the petty cashier on the credit side of the cash book as “By Petty Cash A/c”.
Determination of expenses
The petty cashier starts his petty cash book on 1st February with a cash balance of $500. Maintaining a cash book under the stated system is called an imprest petty cash book. Separate columns are used for each expense in ‘Analytical petty cash book’. Petty cash books are small cash books which record day to day minor business expenditures.
Therefore, the total debits in the ledger agree with the credit in the main cash book. In other words, the petty cash book does not form a part of double-entry bookkeeping. If they record petty expenses in the main cash book, then both the chief cashier and the main cash book will be overburdened. A petty cash book also refers to the book in which small payments are recorded, which are not convenient to record in the main cash book.
- Small or large companies maintain 2 types of Petty Cash Book for all cash transactions of a business.
- These are expenses which are incurred day after day; usually, petty expenses are large in quantity but insignificant in value.
- In all businesses, some payments are made by check for better control over cash.
- Always the voucher would show the amount,
purpose, recipient, general ledger account number and date relating to the expenses. - When the whole amount of petty cash is spent, the petty cashier submits the account to the chief cashier who again pays a lump sum to the petty cashier.
- Every petty cash voucher/receipt is to be signed by the petty cashier and the recipient.
Minor business expenditures include newspaper, fuel, casual labour etc. The petty cashier prepares a statement of petty cash expenditure and sends it along with all petty cash receipts to the cash department. When a petty cash fund comes down to a minimum limit, it is replenished for the spent money. In such cases, the petty cashier is to furnish a requisition for the new fund. Every business organization is to pay cash for various day-to-day petty expenses such as a pencil, rubber, paper, ink, pen, conveyance, telephone, postal stamp, revenue stamp, etc.
Petty Cash Book: Types, Diagrams & Examples
The head cashier after proper verification of the expenditures pays an amount equal to the amount spent by the petty cashier again in advance to equalize the prefixed fund of the petty cashier. At the end of the period, the petty cashier submits to the head cashier a statement of expenditures incurred by him. The difference between the amount of cash receipt and the total amount of cash payments is called balance. To ascertain the total amount of money spent the total money column is used on the credit side for recording all expenses. At the end of each month, when the petty cashier approaches the main cashier for reimbursement, the latter will prepare a cheque voucher. When a payment needs to be made from the petty cash fund, the petty cashier prepares a petty cash voucher (PCV).
The difference between the sum of the debit items and the sum of the credit items represents the balance of the petty cash in hand. A neutral person is engaged to check whether the petty cashier uses the petty cash properly. If these payments are made by cheques, a huge number of cheques are to be issued every day for petty payment which is time-consuming and expensive. Under this system, it is almost impossible on the part of the petty cashier to misappropriate the fund because the head cashier does have full control over the petty cashier.
This format is an excellent way to monitor the current amount of petty cash remaining on hand. When a petty cashier needs money, the main cashier gives them a cheque. Ledger entry for each expense is not directly posted instead a petty cash account is maintained in the firm’s ledger.
- It depends on the nature, volume and necessity of transactions of a business organization.
- On 1st Jan. 2003 head cashier pays $500 to the petty cashier in advance.
- At the end of each month, when the petty cashier approaches the main cashier for reimbursement, the latter will prepare a cheque voucher.
The petty cash book is a recordation of petty cash expenditures, sorted by date. In most cases, the petty cash book is an actual ledger book, rather than a computer record. The petty cash book has declined in importance, as companies are gradually eliminating all use of petty cash, in favor of using company credit cards.
Cash received by the petty cashier is recorded on the debit side, and all payments for petty expenses are recorded on the credit side in one column. He, therefore, usually delegates the responsibility for handling small day to day cash transactions to a bookkeeper, receptionist or some other reliable staff member. Like a general cash book, a petty cash book has a debit and a credit side. All receipts are recorded on the debit side and all payments are recorded on the credit side of petty cash book by the petty cashier. A petty cash book is just as its name suggests a book which is used for the purpose of recording small amounts of expenses in a business.
These small expenditures are usually paid using coins and currency notes rather than checks. The person responsible for spending petty cash and recording it in a petty cash book is known as petty cashier. Under this system, the petty cashier is given a lump sum to meet petty expenses. When the whole amount of petty cash is spent, the petty cashier submits the account to the chief cashier who again pays a lump sum to the petty cashier. The book in which these small payments are recorded is known as the petty cash book. The funds used for small payments are known as petty cash, and the person responsible for making and recording these payments is the petty cashier.
Control over petty expenses
On 1st Jan. 2003 head cashier pays $500 to the petty cashier in advance. In January, the petty cashier spent $400 and submits a statement of expenditure for the spent amount to head cashier. This voucher must be authorized by a responsible officer before the petty cashier makes the payment. The amount spent by the petty cashier is reimbursed, thus making up the balance to the original amount. In addition, the chief cashier in a large business is required to handle numerous large transactions on a daily basis. Any cash received by the cashier is recorded on the debit side of the book.
These are expenses which are incurred day after day; usually, petty expenses are large in quantity but insignificant in value. To record such expenses, a different book known as a petty cash book is maintained. The cash allocated for petty expenditures for a specific period is entered on the credit side of general cash book and on the debit side of petty cash book.
Petty cashier encashes the cheque and keeps this money in a box under lock and key termed as a petty cash box. As per the principle of cash payment, all payments are to be made by cheque. In the case of payment of petty cash, this basic principle of payment by cheque is not followed. The total of expenses recorded in various columns is equal to the total of expenses of total columns which proves that recording of expenses is arithmetically correct.