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. The advantages of petty cash system enumerated are as follows. What are the merits or advantages of maintaining a petty cash. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers. Besides maintaining a main or general cash book, many companies also. Here are some advantages and disadvantages to using petty cash as an expense management solution. Businesses operating on a large scale usually maintain a petty cash book to harness the. Payments in cash of small amounts like traveling expenses, postage, carriage etc. Lastly, there is a total column, to record the total amount. Most cash should be deposited right away in the bank, but a small amount can be kept on hand in a petty cash account earmarked for minor. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced 2. The following points highlight the importance and advantages of petty.
The cash book can be maintained properly as petty transactions are maintained. The date of each transaction is recorded in this column. Petty cash book format example definition explanation. A cash book acts like both a journal and a ledger for cash transactions. Cash book definition, types accounting format of cash book. The posting from the petty cash book to the respective accounts in the ledger are made directly in total at the end of every month or any other fixed period. Petty cash book 2019, imprest system of petty cash.
For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. The firm may adopt imprest system of maintaining petty cash. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. Petty cash book is maintained by the petty cashier. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount.
The amount of float is so fixed that it may be adequate to meet petty expenses of the prescribed period. Download petty cash book excel template petty cash book is a readytouse excel template to systematically record and manage your petty or small daily routine payments. Cash book definition, explanation types and advantages. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly. Large businesses maintain petty cash book to reduce the burden of main cash book. What is the advantages of maintaining the petty cash answers. The petty cash book accounts for the cash spent on this short term arising needs of the company and it is necessary for accountability for the expenditure on the. This separation of cash books has many advantages of the firm like.
As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. Once you have the basics covered, you need to put money into petty cash. Jun 18, 2019 the format of a triple column cash book is given below. Petty cash book maintains records of all petty payments analytically. It relieves the cash book and the chief cashier of the burden of recording tiny. Petty cash book 2019, imprest system of petty cash advantages. Cash and bank transactions can be recorded in cash book. The petty cash book is maintained by separate cashier known as petty cashier. It is an accessible, convenient way to pay for small purchases. Cash book, pass book, bank reconciliation statement dr. What are the advantages of the petty cash book answers. In other words, we can say that if we add a bank column to both sides of a single column cash book, it would become a double column cash book. The petty cashier is given a certain sum of money at the beginning of the fixed period e. Advantages and disadvantages of analytical petty cash book simple method.
As the petty expenses are recorded by petty cashier hence the labor. To get a clear picture of how it looks, go through the following format. The description of each expenditure is recorded in particulars column but the head of expenditure recorded in divide column the major advantage of maintaining analytical petty cash book is that each payment is not necessary to be posted to the ledger. The petty cash book accounts for the cash spent on this short term arising needs of the company and it is necessary for accountability for the expenditure on the resources of the firm. The preservation of petty cash book does not need particular knowledge of accounting. The more scientific method of maintaining petty cash so for introduced into practice is the imprest system. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. What are the main advantages of maintaining cash book.
Advantages, disadvantages, and the pex alternative. It is meant to meet the daytoday expenses and is entrusted in the. A separate column is allotted for each type of expenditure. The petty cash fund is an amount that is maintained by government office for making. An imprest system is a method of utilizing loans as prevention from illegal activity like fraud or theft what is the different cash book and petty cash book. These petty cash expenses are recorded in the petty cash book. Many expenses of small nature are recorded in petty cash book. The importance and advantages of petty cash fund are as follows.
The advantages and importance of the petty cash book are as follows. The petty cash book is a document in business used for recording misclenius expenditure this are the unplanned and shallow demands that may arise in the daily running of the business. 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. The advantages of treble column cash book are stated below, time and laborsaving a good deal of time and labor are saved because for maintaining a treble column cash book cash account, bank account and discount accounts are not needed to be prepared in the ledger. What is the importance of petty cash in a business. Learn more about petty cash expense management, and decide which system is right for your business. The main advantages of imprest system of petty cash are as follows. Study 101 terms accounting 1a ch7 booknotes flashcards. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. A petty cash book gives management a record of all the little. Petty cash is an easy to understand and familiar method of paying for company expenses. The chief cashier is relieved from the cumbersome work of petty cash disbursement. Petty cash book supplies information regarding petty payments.
Petty cash book system are also called as imprest system. At the end of a period totals of all heads of petty expenses are transferred to a relevant ledger account. The system is a form of managing petty cash in a business. Advantages and disadvantages of analytical petty cash book. It is both a book of original entry as well as a book of final entry. Let us learn about the petty cash book and the various systems of maintaining the said account. Apr, 2015 how to prepare petty cash book petty cash book in hindi with example by jolly coaching duration. Definition and explanation of cash book format, advantages. The difference between the total of the debit items and that of the total column on the credit represents the balance of the petty cash in hand.
Petty cash book with imprest system simple and tabular forms. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. Download petty cash book excel template exceldatapro. Besides this the cash book renders the following benefits.
Jul 16, 2019 petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. Maintaining a petty cash book can be simple as long as a person makes sure to keep up on transactions regularly. You should write a check to the custodian to initially establish the fund. Frauds involving cash are likely to be minimized and where committed are likely to be detected at an early stage.
The person who is maintaining petty cash book is called as a petty cashier. What are the advantages of using the imprest system. In almost all businesses, the bulk of transactions related to cash receipts and payments. Petty cash book can be maintained either in a simple or in analytical way. All cash transactions are primarily recorded in it as soon as they take. A cash book which is created for the small payments of an organization i. The check amount should be sufficient to handle most cash purchases for the time period you choose, but not so large as to encourage theft. It is possible to find out daily cash and bank balance. The elements of a cash book can be understood as follows. To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking.
Sep 30, 2019 petty cash is an easy to understand and familiar method of paying for company expenses. 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. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. A petty cash book is just another kind of cash book that records petty cash transactions, i. Notes on petty cash fund grade 10 accountancy petty cash.
Petty cash book explanation, format, example, ordinary and. As head cashier checks the accounts of previous month and gives advance for the. The book in which all cash transactions either cash is received or paid are primarily recorded according to dates, is called cash book. Cashbook helps in effective cash management as management can know the balances of cash and bank at any time and take the necessary decisions accordingly. Petty cash book explanation, format, example, ordinary and imprest. Sep 26, 2019 petty cash book is maintained to record small expenses such as postage, stationery, telegram. Recording transactions on the basis of vouchers and. These are expenses which are incurred day after day.
Cash book also serves the purpose of book of original entry as well as ledger. Double column cash book explanation, format, example. 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. The cash book can be maintained properly as petty transactions are maintained separately. Most petty cash books are maintained by listing receipts and their purchase purpose. How to set up and maintain a petty cash account basic.
Petty cash book maintains records of all petty payments systematically. Cash book could be a checking or other type of money access account. Notes on petty cash book grade 10 accountancy petty cash. Petty cash is a small amount of cash that a business has on. A petty cash book records small cash transactions in separate accounts. Of petty cash is used by most of the companies because of the following advantages. The advantages of analytical petty cash book are given below.
As head cashier check the accounts of previous month and gives advance for the coming month, does, errors if any are reduced. The following are the main advantages of maintaining a cash book. What are the merits or advantages of maintaining a petty cash book especially in large establishments. A petty cash book is created to facilitate small payments in a business or organization. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. A s the petty cashier has to produce to the chief cashier the petty cash book for inspection. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. 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. You need to develop a set of policies or procedures dictating the handling of cash in your business to avoid problems such as theft and misappropriation.
Fixed amount is paid to the petty cashier along with the imprest system. The petty cash book is checked by the chief cashier at the end. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any. Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash. Meaning of petty cash book, its importance and advantages. Petty cash book helps in making the records of cash transactions uptodate because of the division of labor in recording cash transactions. What are the advantages of maintaining a petty cash book. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. Advantages and disadvantages of analytical petty cash book qs. Mar 28, 2019 deposit cash into the petty cash fund. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. The main advantages of petty cash book publish your article. The double column cash book also known as two column cash book has two money columns on both debit and credit sides one to record cash transactions and one to record bank transactions. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced.
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