Petty Cash Book
Many businesses keep a separate cash book known as a petty cash book to record small day-to-day business expenses. A petty cash book is kept to record minor expenditures including mailing, stationery, and telegrams.
Each form of spending is assigned its own column. The difference between the totals of the debit items and the ‘total column’ on the credit reflects the petty cash in hand balance.
Petty Cash System
The cash reserved for petty expenditures for a given time is reported on the credit side of the general cash book and the debit side of the petty cash book.
The cash is issued to the petty cashier using either the regular system or the imprest system, which are briefly discussed below:
The petty cashier receives a lump sum of cash under the ordinary system. When the whole amount has been spent, the petty cashier submits the details of petty transactions recorded in the petty cash book to the head or chief cashier for analysis.
A fixed sum of money known as the float is issued to the petty cashier under the imprest system to cover petty expenses for an agreed time, which is normally a week or month. The petty cashier submits to the chief cashier the details of all expenses incurred by him at the end of the agreed-upon period.
The total cash expended by the petty cashier over time is reimbursed to him, and the total cash available to spend at the beginning of the next period equals the initial amount (i.e., float). At that point in time, the sum of the petty cash balance and all expenses that have not been reimbursed to the petty cashier equals the agreed-upon float.
Types of Petty Cash Book
The petty cash book is classified into two types:
- Simple Petty Cash Book
- Analytical Petty Cash Book
Simple Petty Cash Book
The Simple Petty Cash Book is identical to the main cash book. Petty cashier receipts are reported on the debit side, and all payments for petty expenses are recorded on the credit side in one column.
Format of Simple Petty Cash Book:
|Cash Received||Date||Particular||Voucher no.||Total payments $|
Analytical Petty Cash Book
It is the most convenient way to report petty cash payments. On the credit side, a separate column is given for each petty expense. When a petty expense is reported in the overall payment section, the same sum is then recorded in the corresponding petty expense column.
Format of Analytical Petty Cash Book:
|Cash received||Date||Particular||V.N.||Total Payments||Postage||stationary||sundry|
Example of Petty Cash Book
The petty cashier of ABC Company paid cash for the following expenditures during January 2021.
- January 01: Balance brought forward; petty cash $100.
- January 01: The amount of petty expenditures for previous moth reimbursed by head cashier $250.
- January 05: Bought some material for cleaning purpose $20.
- January 10: Paid $30 for car wash.
- January 13: Bought pens $15.
- January 17: Paid for car fuel $35.
- January 20: Paid $55 for casual labor.
- January 22: Donated $10 to SBA – a charitable institution.
- January 30: Bought a broom for office $5
Required: Record the above transactions in a petty cash book assuming a petty cash imprest system is used by the ABC Company
Petty Cash Book
|100||Jan, 01||Balance b/d|
|Jan, 05||Cleaning Material||35||20||20|
|Jan, 10||Car Wash||36||30||30|
|Jan, 20||Casual labor||39||55||55|
|130||Feb, 01||Balance b/d||130|
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