Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly. This journal entry should also be used when petty cash is replenished. In almost all businesses, it is found necessary to keep small sums of ready money with the cashier or petty cashier for the purpose of. Petty cash book is maintained to record small expenses such as postage, stationery, telegram.
A petty cash fund is an amount of cash that a business uses to make small, miscellaneous purchases. A double column cash book or two column cash book is one which consists of two separate columns on the debit side as well as credit side for recording cash and discount. The cash book is a chronological record of the receipts and payments transactions for a business. Below you will find all the cambridge international examinations igcse accounts 0452 past paper questions categorized into topics. What is the importance of petty cash in a business. General cash book is subdivided in the single column, double column, and treble column cash book. Cash received by the petty cashier is recorded on debit side and all payments for petty expenses are recorded on credit side in one column. C or cb cash book, j journal, pc petty cash book etc. How an embezzler stole millions from a small company. The balance of cash book always means cash in hand. Candidates were required to prepare a petty cash book, make ledger postings and to answer related theory. You use the cash book report to reconcile the petty cash issue and petty cash receipt documents. Single entry bookkeeping is an easy way to step yourself into accounting. They have a cash book which is both a book of prime entry as well as part of the double entry bookkeeping system.
Every time a payment is made through petty cash, it is recorded in the petty cash register usually by the cashier. 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. 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 these are expenses which are incurred day after day. 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 labor etc. Just click the start quiz button and start cash book mcqs quiz. At monthend, expense receipts can be summed and grouped into expense categories. They are there just to explain the purpose of the expenditure. Variation on the petty cash book is to maintain it as a spreadsheet, where each item is recorded in a specific column that is designated for a particular type of receipt or expense. Maintaining a cash book under the stated system is called an imprest petty cash book. This is the column where you should record cash received and cash paid out. Imprest system of petty cash is a system where the petty cashier is given a lump sum in cash often called a float keeping in view the possible needs of the business to meet its petty expenses for a stated period, e. A book in which non cash sales are recorded with details of customer, invoice, amount and date. During a span of more than five years, she stole nearly half the company.
Meaning of petty cash book, its importance and advantages. This format makes it easier to record petty cash activity in the general ledger. There are two types of cashbooks, and they are the 2column cash book and the 3column cashbook. It is another cash book which is maintained, generally, in large business. Record transactions with the singleentry system in a cash book. A 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. Petty cash transaction a petty cash transaction is one in which an employee or business owner takes money out of the petty cash fund for the purpose of buying something for the business. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. It is another cash book which is maintained, generally, in large business concerns to reduce the burden of main cash book, in which numerous transactions involving petty small amounts are recorded. A petty cash voucher is usually a small form that is used to document a disbursement payment from a petty cash fund. A separate column is allotted for each type of expenditure. There might be a petty cash drawer or box in each department for. Columnar petty cash book and its preparation process. The clearing account balance is the total of wages, workers comp, employer taxes and payroll fees all monies involved in the dispensing of wages.
So, the book, wherein day to day petty expenses for a particular period of a business concern, are recorded in chronological order of dates is called petty cash book. The account structure is built using the chart of accounts function in the accounting software. Take a quick multiple choice questions mcqs test about cash book. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established during an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. A petty cash is a cash book used to enter all small or petty expenses obtained. By watching this video you will understand how to record all the entries into the. Cash book serves the purpose of journal and ledger. The is only one money column on the debit side and all sum received from time to time by the petty cashier from the chief cashier are entered in it. The ruling of analytical petty cashbook is given below. And its cheap because you do not have to invest in bookkeeping software. Advantages of petty cash book are burden of main cash book keeper is reduced, helps in. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. At the end of the period a petty cash reconciliation is carried out.
The primary bookkeeping record in singleentry bookkeeping is the cash book, which is similar to a checking account register in uk. Enter the transaction on the debit or credit side and it will automatically calculate the cash on hand for you. Analytical and imprest system of petty cash book your article library. Employees take money from the petty cash account, recording each transaction with date, amount, vendor who was paid, and business purpose.
All these sums are listed as a debit on the left side of the accounting ledger. Petty cash or the petty cash fund is a small amount of cash on hand used for paying expenses too small to merit writing a check. To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory. Petty cash is an easy to understand and familiar method of paying for company expenses. Sample petty cash book running balance yet another variation on the petty cash book is to maintain it as a spreadsheet, where each item is recorded in a specific column that is designated for a particular type of receipt or expense. To set up a petty cash system, the initial amount of money comes from the business checking account. The date of transaction is written in this column in two linesin the first line, the year and in the second line, the name of. Petty cash book maintains records of all petty payments systematically. The differences between his cash book and bank statement balances at 30 april are.
Cash book contains all cash receipts and payments, including bank deposits and withdrawals. This is so because, as explained later, subsequent checks drawn to replenish petty cash are not debited to petty cash account, but are charged directly to the various accounts for which the petty cash funds have been expended from this petty cash fund the cashier makes such payments as are necessary, recording each one in a book similar to that shown in form 4. Ledgers comprise a record of changes debit and credit transactions concerning. Meaning, imprest system and its advantages differences between cash book and cash flow statement. 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. It uses columns to organize different uses of cash for your business. An example of this format, using the same information as the preceding example, is as follows. For this purpose, a petty cashier is appointed by the chief cashier. Petty cash vouchers are also referred to as petty cash receipts and can be purchased from office supply stores the petty cash voucher should provide space for the following. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and.
Simple petty cash book is just like the main cash book. The interesting part is that petty cash is the very first account in the chart of accounts. Petty cash book elearning, etutoring, school education support. Since only cash transactions are recorded in the cash book it is a special journal. Petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. Adams petty cash 2part carbonless receipts book, 2. Two column cash book or double column cash book definition with explanation and format with examples are disscused here. The credit side consists of several analysis columns. Cash book columns track key information about your finances. Petty cash book it is another cash book which is maintained, generally, in large business concerns to reduce the burden of main cash book, in which numerous transactions involving petty small amounts are recorded. Accounting for petty cash explanation, related controls. The petty cashier of john and james company paid cash for the following expenditures during march 2018. Yet another variation on the petty cash book is to maintain it as a spreadsheet, where each item is recorded in a specific column that is designated for a particular type of receipt or expense. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well.
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 book explanation, format, example, ordinary. A cash book is a financial journal in which cash receipts and payments including bank deposits and withdrawals are recorded first in a chronological order ie recorded according to the date of transaction. This first article focuses on understanding the cash book. This is the second part of our look at the topic of transferring data from a cash book. Petty cash book is the cash book which involves small cash payment and receipt during daily business operation. Cash book contains cash transactions passing into and out of a business. Balance of cash book and cash of a cash box must be equal. An explanation of the types of funds managed by municipalities and the types of records found. Petty cash balance after reimbursement reverts to back to the level of the float. Generate the cash book report p74r0050 oracle docs. Download cash book excel template 5 types of cash book templates with predefined formulas to help you record routine cash transactions of a company regularly. A petty cash book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure.
When the cashier requests for reimbursement of petty cash, he creates a petty cash voucher detailing the payments made through petty cash during the. These mcqs can help you to prepare for your exams, interviews and different tests. Understand how to make all the necessary entries in to the petty cash book. Definition and explanation of cash book with examples. This is used to record any cash received after which it is posted in the cash column in the cash book. The cash book is updated from original accounting source documents, and is therefore a book of prime entry and as such, can be classified as a special journal unlike other special journals such as the purchases journal or the sales journal, the cash ledger book records debit and credit entries. Yet another variation on the petty cash book is to maintain it as a spreadsheet, where each item is recorded in a specific column that is. Petty cash book definition, types, format, examples. New details have emerged on the methods used and the outcomes following the case of 47yearold convicted embezzler sujata sue sachdeva, who was the trusted 15year veteran vice president of finance, secretary, and principal accounting officer of koss corporation.
If you find difficulty in answering these questions, read cash book chapter thoroughly from explanation section of the. When an initial petty cash account is set up, a journal entry should debit the petty cash account and credit cash. The totals of the columns in the credit side of the cash book at the end of the month are. Part a required candidates to explain one reason for maintaining a petty cash book. These small expenditures are usually paid using coins and currency notes rather than checks. The imprest petty cash system is a method of accounting for petty cash expenses. Petty cash book format example definition explanation. A sales book is also known as sales day book is a book of prime entry in which are recorded the. It is an accessible, convenient way to pay for small purchases. Before explaining the four variations of petty cash, ill explain the account structure used with bookkeeping.655 1396 199 546 1240 1205 1258 103 1273 1479 1532 446 499 1355 872 1576 1474 235 1337 994 262 733 305 841 488 123 619 1027 265 583 972 543 903 837 108