Many businesses keep a smaller cash book called a petty cash book to document the company’s daily little costs. Larger and smaller firms retain two types of petty cash books for all money transactions inside the company.
Petty Cash Book
The Petty Cash Book is described as a little sum of cash kept on hand for making rapid payments for numerous small company needs.
Petty Cash Book Format
For your convenience, the Petty Cash Book format is provided below.
– COMPANY –
PETTY CASH BOOK
|Receipt||Date||Details||VN||Total||Expense 1||Expense 2||Expense 3|
Petty Cash Book Types
There are two kinds of petty cash books. These are
Simple Petty Cash Register
- It’s comparable to the original petty cash book.
- The cash received is recorded in the cash book’s debit area.
- Petty cashier payments are entered on the credit side of the book.
Analytical Petty Cash Register
- In an analytical petty cash book, each petty cost on the credit side gets its own column.
- The exact amount is entered in the particular petty expenditure field whenever a petty expense is reported in the total payment column.
- The most dependable and practical way to record petty spending is using an analytical petty cash book.
What Is an Example of a Petty Cash Book?
- When a check or a corporate credit card is unrealistic, undesirable, or unavailable, petty cash provides a business convenience for small purchases.
- The amount of petty cash (bills and coins) will vary with each firm, but it is normally between ₹100 and ₹500.
A Petty Cash fund might be used for the following transactions:
- Office equipment.
- Cards, flowers, and other little items.
- Providing staff with a small lunch, coffee, or goodies.
- Allowing an employee to be reimbursed for small work-related expenses.
- Fees for courier or another last-minute shipment.
Benefits of a Petty Cash Book
- It serves as a healthy check on the petty cashier since he is required to provide the petty expense statement to the chief cashier.
- Because all small costs must be documented in the cashbook on a regular basis, the petty cash book is always up to date.
- Because the petty cashier cannot withdraw money anytime he wants, the imprest system of petty cash books avoids undue cash collection.
- Under the Imprest petty cash method, the head cashier is constantly aware of the cash supplied to the petty cashier.
- The Imprest petty cash system allows you to determine and know the number of costs of the same type in each column independently for a given period.
The Drawbacks of a Petty Cash Book
- Petty cash book uses the money for non-business purposes, restricting formal usage of funds.
- Workers may waste valuable cash due to a lack of control and surveillance.
- Petty cash books can potentially lead to accounting mistakes due to poor documentation of cash in hand tracking.
- Keeping track of every monetary transaction is challenging. This might result in losses and unneeded costs.
Petty Cash Management
- Petty cash funds, therefore, are subject to mismanagement and may even result in open fraud.
- A petty cash management system provides organizations in ensuring that money is used responsibly and transactions are accurately documented.
- Having such a system in place helps as an internal control to safeguard the company from theft and fraud, as well as supporting the wider general ledger peace process.
Petty Cash Book to Ledger Posting
- When the second cashier comes to the main cashier for a refund, the second cashier creates a check voucher.
- The later cashier gives the total of the small-cash book’s analysis columns.
Consider the following examples: Salary (₹113.20)
- The entries in the main Cash Book are as follows: If a check (for ₹402′) is made payable to a petty cashier
- On the Cash Book side, the ₹402 is displayed as Cr. Payment (Bank Column).
- In the ledger, the wages account is debited by ₹113.20; ₹41.80; ₹86.60; ₹26.40 in the Tea Staff account; and ₹140 dollars in the Telephone account. The account does not appear in the directory.
- As a result, the debtors in the primary cash book consent to the credit.
- This means that the Petty Cash Book does not fall under the purview of double-entry accounting.
- It has the same status as a subsidiary book.
- The small cashier must always have cash or small payment vouchers sufficient for the printing account on hand.