Petty Cash Book

Petty Cash Book

 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:

Ordinary system:

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.

Imprest system:

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 ReceivedDateParticularVoucher 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 receivedDateParticularV.N.Total PaymentsPostagestationarysundry

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

ABC Company

Petty Cash Book

100Jan, 01Balance b/d      
250Jan, 01Cash      
 Jan, 05Cleaning Material3520  20 
 Jan, 10Car Wash3630 30  
 Jan, 13Stationary371515   
 Jan, 17Fuel3835 35  
 Jan, 20Casual labor3955   55
 Jan, 22Donation4010   10
 Jan, 30Broom415  5 
    Total 17015652565
  Balance c/d 130    
300   300    
130Feb, 01Balance b/d 130    
170Feb, 01Cash      

We also have:

What is Journal Entry in Accounting?

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What is Trial Balance in Accounting?

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