Topic 6 petty cash book

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petty cash books

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Is petty cash book a journal or ledger?

Part of the manual record-keeping system of a firm, in most companies, a petty cash book is a ledger book instead of a computer record. This is different from bookkeeping which is the process of recording your company's financial transactions into organized accounts.

Hence, all such transactions are booked under the petty cash account. The head cashier can control big payments directly and petty payments by keeping a proper check on the petty cashier. This way the chances of making frauds and embezzlements become very difficult.

Petty Cash Book

Petty cash is part of the overall business system that records how cash move from one account to another and how the fund is spent. A government office requires to pay different types of petty expenses daily. It is impractical and inconvenient for paying such petty expenses, like bus fair, cartage, and postage stamp through cheque. To pay such petty expenses directly in cash, every government office creates petty cash fund.

A Beginner’s Guide to Petty Cash: Managing and Recording It – The Motley Fool

A Beginner’s Guide to Petty Cash: Managing and Recording It.

Posted: Wed, 18 May 2022 17:00:06 GMT [source]

Keep the petty cash secure and only give trusted people access, says Signature Analytics. Make sure there is proper training of the system and uses of petty cash before giving access to someone. 4.The imprest system enables significant saving to be effected to post small items to accounts in the ledger since it uses an analysis system that collects small items together into weekly introducing wave money small business solution or monthly totals. 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. It should be noted that the amount of expenditure in the hands of a petty cashier cannot exceed the amount he receives.

What are the systems for maintaining a petty cash book?

Petty cash should be part of an overall business accounting system that documents how your business moves funds between one account and another and how it spends its money. 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. The total cash spent by the petty cashier during the period is reimbursed to him and the total cash available to spend at the start of the next period becomes equal to the original sum (i.e., float). At any time, the total of petty cash balance and all expenditures that have not been reimbursed to the petty cashier is equal to the agreed float.

petty cash books

Therefore, a special ledger account is introduced in the main cash book system, commonly known as a petty cash book. Petty cash is a system that funds and tracks small purchases such as parking meter fees that aren’t suitable for check or credit card payments. A petty cash book is a ledger kept with the petty cash fund to record amounts that are added to or subtracted from its balance.

Manage business expenses with Soldo

Under imprest, petty cash book system petty expenses are recorded in chronological order of dates. After a certain period, the amount of total expenses is sorted out and the amount of every head of expenditure is totaled separately. 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. 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 record how the cash in the petty cash drawer was used.

  • Columns for the date, voucher number, and particulars are common for both receipts and payments.
  • At the end of each month, when the petty cashier approaches the main cashier for reimbursement, the latter will prepare a cheque voucher.
  • The columns for “payments” and “expenses” are totalled and it equals the total in the “Total Payment” column.
  • In all businesses, some payments are made by check for better control over cash.
  • This is a system where by the main cashier extends some lump sum amount of cash to the petty cashier to utilize in payment of small day to day expenses of the organization.

From the following information please show a simple petty cash book for the 1st week of Feb YYYY. Because the cash book is updated continuously, it will be in chronological order by transaction. In the description column, the accountant writes a short description or narration of the transaction. In the reference or ledger folio column, the accountant inputs the account number for the related general ledger account. Therefore, it is a good idea to have a monthly round-up of expenses paid by the company so that a proper balance is maintained in the company. Some examples of petty cash expenses include stationery costs, printing costs, and regular plumbing works.

What is another name for the petty cash book?

The other name for columnar petty cash book is analytical petty cash book. Also read: Cash Book. Cash Flow Statement.

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