PETTY CASH BOOK

MEANING OF PETTY CASH BOOK:
A petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically. Petty cash book is maintained by the petty cashier. Petty cash book can be maintained either in a simple or in analytical way.

Importance And Advantages Of Petty Cash Book
Business performing a large number of petty transactions usually maintain a separate petty cash book. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well.

* Petty cash book maintains records of all petty payments systematically.

* Petty cash book supplies information regarding petty payments made on different heads more easily and quickly.

* Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively.

* Petty cash reduces the burden of head cashier as he is not required to handle petty transactions. Hence, the head cashier will have enough time to manage and control major cash transactions more effectively.

System Of Petty Cash Accounting :

1. Open System:

Under this system the Petty Cashier at first receives from the Chief Cashier a fixed sum of money for meeting petty expenses. As soon as the said amount is spent, the Chief Cashier again pays the required sum to the Petty Cashier.

2. Fixed Advance System:

Under this system the Petty Cashier receives from the Chief Cashier a fixed Slim of money for a fixed period of time i.e. $200 per month. The Chief Cashier will pay $200 to the Petty Cashier every month irrespective of this that whether the Petty Cashier has spent the total sum or not.

3. Imprest System :

This system is generally followed by most of the business concerns. Under this system, the total petty expenses for a particular period are estimated and that amount is advanced by the Chief Cashier to the Petty Cashier. This amount is called Imprest Cash. On the expiry of the fixed period the Petty Cashier prepares a statement of his expenses and submits it to the Chief Cashier. This statement is known as Statement of Petty, Expenses. The Chief Cashier examines the statement and if he finds it correct, hands over the Petty Cashier an amount equal to the amount actually spent. This amount plus the amount lying unspent with the Petty Cashier will be equal to the Imprest Cash.

In this way the Petty Cashier will start every time with an amount equal to Imprest Cash. In other words, the amount lying with the Petty Cashier will never exceed Imprest Cash. Generally a columnar Petty Cash Book is used in which different columns are provided for different petty expenses.

The balance of the Petty Cash Book will be shown on the asset side of balance sheet as "Cash in hand" at the end of the year.

Example:

From the following particulars prepare a Petty Cash Book under Imprest System. 2005

Jan. 1. Received from the Chief Cashier as imprest cash $400.Jan. 2. Paid Taxi hire $20. Jan. 3. Paid postage $28 and stationery $60. Jan. 4. Purchased stationery $48. Jan. 5. Paid telegram charges $28 and bus fare $4. Jan. 6. Bought postage stamps $96. Jan. 7. Paid $72 for repairs of typewriter.

Solution:

Petty Cash Book

Amount Received $	Date	Particulars	V. No.	Total $	Traveling Expenses $	Postages $	Stationery $	Office Expenses $	Misc. Expenses $
400	2005	Cash Received
	Jun. 1
	Jun. 2	Taxi hire A/c		20	20
	Jun. 3	Postage A/c		28		28
	Jun. 3	Stationery A/c		60			60
	Jun. 4	Stationery A/c		48			48
	Jun. 5	Telegram A/c		28		28
	Jun. 5	Bus fare A/c		4	4
	Jun. 6	Postage A/c		96		96
	Jun. 7	Repairs A/c		72				72
				356	24	152	108	72
		Balance c/d		44
400				400
44	Jun. 8	Balance b/d
356		Cash received