Is a person who received money in order to meet petty expenditures. In a modern economy in which technology is a staple in corporate accounting, this journal resembles more an electronic repository. As its name indicates, cash accounting is primarily concerned with one thing. Why petty cash is important for your business finances. Double column cash book explanation, format and examples. Double column cash book columns have the following advantages in addition to those of single cash column book it is more convenient as cash and bank accounts are kept side by side at one place. Keep this log readily available so you can fill it in on a regular basis taking the information off the petty cash vouchers. You need to develop a set of policies or procedures dictating the handling of cash in your business to avoid problems such as theft and misappropriation. It also saves time in posting each item of petty payments unnecessarily in the ledger. Apr 26, 2020 the petty cash book is a formal summarization of petty cash expenditures, sorted by date.
Below are the main advantages of using cash accounting for financial reporting and tax purposes. Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash. Outgoing cash flows range from vendor and service provider remittances to salary and tax payments. 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. The system is a form of managing petty cash in a business. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Or is the book which used to record the small expenditure which incurred by the businessorganization for a certain period of time such as day to day, week to week or month petty cashier. 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. The book in which all cash transactions either cash is received or paid are primarily recorded according to dates, is called cash book. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Entries are recorded just like a ledger account with the help of. 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. An imprest system of petty cash is used for more control over cash in hand.
Most cash should be deposited right away in the bank, but a small amount can be kept on hand in a petty cash account earmarked for minor. Petty cash funds are routine expenses that involve the insignificant amounts of money not eligible for credit card and cheque payments. Petty cash book maintains records of all petty payments systematically. Keeping large amounts of petty cash may also increase the likelihood of theft in your business. The chief cashier is relieved from the cumbersome work of petty cash disbursement. All cash transactions are primarily recorded in it as soon as they take. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. These include money coming in corporate vaults from sources as varied as customers, bank savings accounts and vendors through rebate and discount programs, for example. Petty cashier is not allowed to keep idle cash with him if the float is found to be more. The main advantages of petty cash book publish your article. When petty cash is easy to get to employees, it is a suitable way to pay for little purchases. Is the cash book which used to record small expensesexpenditure which take place from time to time within the business. What are the main advantages of maintaining cash book.
This type helps in managing and accounting for petty cash. The following are the advantages of keeping the petty cash book. 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. Meaning of petty cash book, its importance and advantages. Petty cash book explanation, format, example, ordinary and.
Jul 16, 2019 the most important part of a petty cash system is the documentation of each transaction. The advantages of analytical petty cash book are given below. Cash book also serves the purpose of a book of original entry as. Oct 04, 2019 double column cash book columns have the following advantages in addition to those of single cash column book it is more convenient as cash and bank accounts are kept side by side at one place. What is petty cash and how to manage and record it. Petty cash book format example definition explanation. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced 2. What are the advantages of maintaining a petty cash book.
Limit access to the petty cash account to two people and store the cash in a tamperproof safe. Thus, the book is part of a manual recordkeeping system. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to 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. Scroll down to step 2 below for a completed example. One is that the cash is limited so the chances of losing money are limited. Understand how the imprest system works in the petty cash book. 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.
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. Keeping petty cash on hand for small purchases, however, allows employees to go around. Keeping track of petty cash using an excel spreadsheet will consist of two primary steps. Cash book also serves the purpose of book of original entry as well as ledger. Cash accounting can also be costeffective, especially if your business structure is a sole proprietorship or partnership. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. It helps the senior accounts officer or chief cashier to concentrate on more important work by leaving the keeping of the petty cash to the petty. By keeping track of all petty cash transactions no matter how petty you have records to back up deductions for those small business expenses. What are the advantages of using the imprest system. The cash book can be maintained properly as petty transactions are maintained separately.
It is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Petty cash book 2019, imprest system of petty cash. For this purpose, a petty cashier is appointed by the chief cashier. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced.
The main advantages of imprest system of petty cash are as follows. Cash in hand at any time can simply be ascertained through cash book balance. Petty cash book 2019, imprest system of petty cash advantages. The advantages of using a petty cash book are as follows. Or is the book which used to record the small expenditure which incurred by the businessorganization for a certain period of time such as day to day, week to week or month. It is an accessible, convenient way to pay for small purchases. These types of transactions require more time and paperwork to complete. 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. The advantages of petty cash system enumerated are as follows.
By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. The petty cash book is maintained by separate cashier known as petty cashier. Petty cash book explanation, format, example, ordinary. The importance of a cash book in accounting bizfluent. Using imprest, the petty cash of a company is kept at a constant rate.
Aug 01, 2018 keeping track of petty cash using an excel spreadsheet will consist of two primary steps. The record of petty cash is checked by the cashier periodically, so that a mistake, if committed. Oct 14, 2017 a petty cash fund is generally kept so that employees of a business can make small purchases without having to requisition money, use a company credit or debit card, or have a check cut. A petty cash book, therefore, serves the purpose of a ledger, keeping track of all business payments made on a small scale. Thus, the book is part of a manual record keeping system. The following points highlight the importance and advantages of petty. Limits discretionary spending and preventing small purchases from snowballing into a significant annual expense. These petty cash expenses are recorded in the petty cash book. Heres how you can set up an effective, easytomanage petty cash system. What is the importance of petty cash in a business. Documenting transactions is the way a business documents business expenses for tax purposes. Companies use actual information for cash collections and payments to create a budget. Petty cash is a comprehensible and common method of paying for business operating cost. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance.
In the 21st century, we have better ways to pay for small business purchases and keep track of them. The petty cashier of john and james company paid cash for the following expenditures during march 2018. Keeping a petty cash book prevents clustering of the cash book with minor expenses. In most cases, the petty cash book is an actual ledger book, rather than a computer record. Avoid making the petty cash accessible to all employees, as this sets the stage for theft. Bookkeeping accounting will help you plan ahead for your business. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. There are two primary types of entries in the petty cash book, which are a debit to record cash received. Many expenses of small nature are recorded in petty cash book. Also known as a two column cash book, a double column cash book is the one which has a bank column in addition to the regular cash column. Cash and bank transactions can be recorded in cash book. Cash book a cash book is a document in which corporate accountants and, more principally, bookkeepers and junior accountants record all cash transactions. These are expenses which are incurred day after day.
The firm may adopt imprest system of maintaining petty cash. As the petty cashier has to account for his expenses, before he can draw further sums. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Sep 30, 2019 petty cash is an easy to understand and familiar method of paying for company expenses. The imprest system master principles of accounts poa.
Any fault in the book can be simply detected at the instance of certification of cash. Petty cash is an easy to understand and familiar method of paying for company expenses. 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. The cash receipts and disbursements method is a budgeting process. The most important part of a petty cash system is the documentation of each transaction. The advantages of the imprest system are as follows. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. Forecasting your business needs ahead and planning for purchases and other business miscellaneous will become easier with bookkeeping.
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. Meaning of petty cash book and advantages of keeping petty. 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. Nov 27, 2019 in the petty cash book not part of the double entry bookkeeping system, the cash received to replenish the fund of 65 is recorded and the imprest fund is now back to its original cash amount of 100. 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. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. Advantages of the imprest system of keeping petty cash the petty cash book is used to record small payments. It is cost and time effective as no separate bank account is required to be maintained. Fixed amount is paid to the petty cashier along with the imprest system. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly. Uses of petty cash book its a cash book used to enter daily petty expenses.
Such payments include postage, reimbursement to employees for small purchases of office supplies and numerous similar items. The importance of bookkeeping accounting for small businesses. 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. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. In other words, we can say that if we add a bank column to both sides of a single column cash book, it would become a double column cash book. Petty cash book is maintained by the petty cashier. Double column cash book explanation, format, example. In some cases, a company can even use this process to create income statements and other reports for future use. What are the advantages of a imprest system for petty cash. This type enables the businessman to know the information about the amount being spent on each head of petty expense. As head cashier check the accounts of previous month and gives advance for the coming month, does, errors if any are reduced.
The imprest petty cash system is a method of accounting for petty cash expenses. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. It is possible to find out daily cash and bank balance. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure.
In the days when we paid for all small business transactions in cash, it was necessary to be intentional about keeping track of those transactions. Petty cash book can be maintained either in a simple or in analytical way. The book in which all cash transactions either cash is received or paid are mainly recorded according to dates, is called cash book. It relieves the cash book and the chief cashier of the burden of recording tiny.
Advantages and disadvantages of analytical petty cash book. The double column cash book also known as two column cash book has two money columns on both debit and credit sides one to record cash transactions and one to record bank transactions. At the end of the period a petty cash reconciliation is carried out. Dec 09, 2019 advantages of keeping petty cash book. Forecasting your business needs ahead and planning for purchases and other business. It helps the senior accounts officer or chief cashier to concentrate on more important work by leaving the keeping of the petty cash to the petty cashier.
Business performing a large number of petty transactions usually maintain a separate petty cash book. Frauds involving cash are likely to be minimized and where committed are likely to be detected at an early stage. Nov 23, 2015 understand how the imprest system works in the petty cash book. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established during an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. Prepare a blank petty cash log utilizing a small book or you can use this free pdf template. As head cashier checks the accounts of previous month and gives advance for the. Book keeping form two the petty cash book msomi maktaba. Just like the other type of books, it records receipts from cash and bank on the left side and payments on the right side.258 820 1480 1500 534 575 807 833 1058 559 1518 585 431 652 1218 799 1011 1215 215 1063 796 295 576 1374 1150 1499 224 846 675 55 1467