The book in which all cash transactions either cash is received or paid are primarily recorded according to dates, is called cash book. Meaning of petty cash book, its importance and advantages. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. The petty cash voucher is an important form of evidence for reconciling the remaining cash in the petty cash box. Petty cash is an easy to understand and familiar method of paying for company expenses. Generally, in all business houses, payments are made by cheque for battery control. Petty cash fund is a relatively small amount of cash that businesses keep on hand for the purpose of small transactions such as providing change to customers, postage expenses, highway tolls etc. Petty cash book explanation, format, example, ordinary. Petty cash book is maintained by the petty cashier. Petty cash fund definition journal entries example. 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. Meaning, importance, steps of cash control explained differences between transaction and event in accounting. Similarly, when cash is paid out the same is recorded on the credit or right hand side of the cash book. In larger firms, it is commonly divided into two parts.
There are numerous small payments on account of expenses like stationery, cartage, coolie hire, refreshments to guests etc. Journal in which all cash receipts and payments including bank deposits and withdrawals are recorded first, in chronological order, for posting to general ledger. Petty cash transaction 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. Carrying on with our accounting question blog series, this week were focusing on petty cash primarily what it is, the main procedure behind it, and how you can use clear books to record your expenditure what is petty cash. Petty cash financial accounting simple book production. Cash book contains cash transactions passing into and out of a business. Generally, in all business houses, payments are made by cheque for battery control over cash. The clearing account balance is the total of wages, workers comp, employer taxes and payroll fees all monies involved in the dispensing of wages. When you need to make a small purchase such as a book of stamps, take a ten or twenty out, make your purchase, and when you returnput the petty cash receipt remember to always get a receipt and change back in the box. The initial fund would be created by issuing a cheque for. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Petty cash book introduction cash book accounts class. 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. Cash book explanations show your love for us by sharing our contents.
The information in your petty cash book is part of a larger accounting system that explains your companys. A doubletwo column cash book to record cash as well as bank transactions. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. Petty cash book explanation, format, example, ordinary and imprest. Under this system the petty cashier at first receives from the chief cashier a fixed sum of. Also included as a part of cash are the balances kept at banking and financial institutions. Cash includes currency and coins, although most businesses do not keep much of this type of cash around. 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 to record small day to day cash expenditures. The date of transaction is written in this column in two linesin the first line, the year and in the second line, the name of. The reason for replenishing the fund at the end of the accounting period is that no record of the fund expenditures is in the accounts until the check is written and a journal entry is made. Print out a petty cash form or petty cash vouchers and keep in the locked box with your petty cash. Cash that a company keeps available for small transactions with customers.
The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and. This book records all those expenses which are small in amount and which are incurred on regular basis. Petty expenses are recorded in petty cash book in chronological order of dates instead of the. Types of petty cash book in accounting with diagrams and examples 7 different types of journal book. These small expenditures are usually paid using coins and currency notes rather than checks. How to set up and maintain a petty cash account basic. There are two primary types of entries in the petty cash book, which are a debit to record cash received.
Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. A 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. Like a general cash book, a petty cash book has a debit and a credit side. You are welcome to learn a range of topics from accounting, economics, finance and more. But the payment of small expenditures like, stationery, traveling, postage, telegrams, office teas and newspapers by cheque are impartial. Cash control means managing and monitoring credit and collection policies, cash allocation, and disbursement policies, accounts payable policies and the invoicing cycle.
A small amount of cash kept on hand by a business for incidental expenses. Petty cash book is a ledger book, which is used to record petty cash. Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque the most common way of accounting for petty cash expenditures is to use the imprest system. Petty cash book is a formal book of recording petty expenses which are incurred in cash. A petty cash fund is a small amount of cash kept on hand to pay for minor expenses, such as office supplies or reimbursements. The cash book is a chronological record of the receipts and payments transactions for a business.
We hope you like the work that has been done, and if you have any suggestions, your feedback is highly valuable. The establishment of a petty cash system begins by making out a check to cash, cashing it, and placing the cash in a petty cash box. A triplethree column cash book to record cash, bank and purchase discount and sales discount. All these sums are listed as a debit on the left side of the accounting ledger. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. In such transactions, the use of checks is time consuming, costly or illogical.
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. Cash book is a book of original entry in which all the transactions relating to cash receipts and payments are recorded in chronological order. 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. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory. Thus, the book is part of a manual recordkeeping system. 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. Petty cash book is maintained to record small expenses such as. The cash book is updated from original accounting source documents, and is therefore a book of prime entry and as such, can be classified as a special journal unlike other special journals such as the purchases journal or the sales journal, the cash ledger book records debit and credit entries. A petty cash book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure. Under this system the petty cashier at first receives from the chief cashier a fixed sum of money for meeting.
This is the only amount of cash that is not immediately deposited in the bank account after it is received. These are expenses which are incurred day after day. Surprise cash counts must be conducted time to time to ensure the accuracy of the cash balance stated in the petty cash register the amount of petty cash float should not be set too high since petty cash register does not form part of the double entry system, payments made through petty cash are subsequently posted into the cash ledger and the. How to prepare petty cash bookpetty cash book in hindi. Cash receipt is entered on the debit side and cash payment is recorded on credit side of the cash book. A petty cash is a cash book used to enter all small or petty expenses obtained. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. 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. The primary book where transactions regarding cash receipts and payments are recorded in a chronological order of dates with explanations and balance is drawn at the end of the day or a particular period is called cash book. The book in which those small payments are recorded, which are not convenient to record in main cash book, is called petty cash book explanation. Analytical petty cash book an analytical petty cash book is one in which there is one amount column in its debit side and a number of columns on its credit side for different heads of expenses. In big business firms, all payments are made by cheques and all receipts are banked. A petty cash book is a ledger kept with the petty cash fund to record amounts that are. Petty cash definition of petty cash by the free dictionary.
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. Petty cash book definition of petty cash book by the. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. In most companies, there are many occasions in which a small amount of cash must be spent on short notice. Cash book definition, example and format of cash book. The primary bookkeeping record in singleentry bookkeeping is the cash book, which is similar to a checking account register in uk.
In almost all businesses, it is found necessary to keep small sums of ready money with the cashier or petty cashier for the purpose of. Petty cash book can be maintained either in a simple or in analytical way. 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. In this video, i will teach you about petty cash book. Examples include postage due, reimbursement to employees for small purchases of office supplies, and numerous similar items. How the imprest system of petty cash book works your. Thus, the book in which small payments, which are not convenient to record in the main cash book, like postage, traveling expenses, purchase of stationery etc. Cash book is regularly reconciled with the bank statements as an internal auditing measure. A petty cash fund will undergo periodic reconciliations, with transactions also recorded on the financial statements. It is an accessible, convenient way to pay for small purchases. There might be a petty cash drawer or box in each department for. Petty cash book format example definition explanation. Cash book is a book of original entry in which transactions relating only to cash receipts and payments are recorded in detail. Small or large companies maintain 2 types of petty cash book for all cash transactions of a business.
The petty cash book is a recordation of petty cash expenditures, sorted by date. Petty cash definition, explanation and journal entries. At the beginning of an accounting period, there should be a certain amount of cash in the box and no vouchers which should have been removed as part of the monthend entry for the preceding month. In most cases, the petty cash book is an actual ledger book, rather than a computer record. When cash is received it is entered on the debit or left hand side. 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. Petty cash is often used to pay for postage, small office supplies, and other small purchases. Definition, examples, how to prepare a trial balance.
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. Accounting for petty cash explanation, related controls. Companies replenish the petty cash fund at the end of the accounting period, or sooner if it becomes low. For this purpose, a petty cashier is appointed by the chief cashier. Relatively small amount of cash kept at hand for making immediate payments for miscellaneous small expenses. There might be a petty cash fund, which can be a drawer or box.
A petty cash fund is established by transferring a specified amount of cash from the general checking account to a person who is given custodial responsibility for the fund. Petty cash, also known as imprest cash, is a fund established for making small payments that are impractical to pay by check. Petty cash is the small amount of cash that is kept on hand by a company to pay for minor, inexpensive purchases during the normal course of operations. The petty cash clerk also turns in a copy of his or her petty cash book to the general ledger accountant or cashier, who creates a journal entry to. A petty cash fund is an amount of cash that a business uses to make small, miscellaneous purchases. The credit side consists of several analysis columns.
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