Recording of transaction in cash book and journal with specimen. However, failing to hold employees accountable for petty cash may encourage theft or inappropriate use of company resources. Petty cash is often used to pay for postage, small office supplies, and other small purchases. The primary bookkeeping record in singleentry bookkeeping is the cash book, which is similar to a checking account register in uk. In almost all businesses, the bulk of transactions related to cash receipts and payments. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. Noncash transactions of cash books are transferred to a relevant account in the ledger.
Entries in the cash book are then posted into the general. When cash is received it is entered on the debit or left hand side. Every time a payment is made through petty cash, it is recorded in the petty cash register usually by the cashier. In almost all businesses, it is found necessary to keep small sums of. Petty cash book is maintained by the petty cashier. 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. 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. When the petty cash fund is operated as an imprest fund, the recording of the petty expenses paid will be made in the petty cash book. Cash book definition, explanation types and advantages. Petty cash book format example definition explanation. These are expenses which are incurred day after day. The difference between petty cash and cash on hand bizfluent. The balance of cash book always means cash in hand. Small or large companies maintain 2 types of petty cash book for all cash.
This fund is accounted for like it was another bank account. For recording transactions in the simple cash book, the foremost step is to understand. Before talking about the cash book, we would briefly explain what is cash. Waec gce book keeping questions 2020 objective and theory. What are the advantages of maintaining a petty cash book. What is a cash book definition, explanation and types. In this book, separate columns are provided for usual head of expenditure. The petty cash book is a useful control over petty cash expenditures, since it forces the petty cash clerk to formally record all cash inflows and cash outflows.
The petty cash book is a book of vouchers which are made each time an expense is made from petty cash money. Examples of these payments are office supplies, cards, flowers, and so forth. 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 petty cash book is ruled in the form of the single column cash book with an amount column and addition oat columns for the more usual classes of expenditure. It is both a book of original entry as well as a book of final entry. When an analytical petty cash book is maintained for recording the petty expenses, it will be practically more convenient to consider the petty cash as a separate account and take cheques issued for the petty cash imprest as a debit to petty cash account and all petty expenses paid as credits in petty cash account. Similarly, payment is restricted out of this fund for some heads of expenditure such as payment of the shortterm loan to employees.
Sep 19, 2019 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. Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque. Cash book is a book of original entry in which transactions relating only to cash receipts and payments are recorded in detail. Cash and internal control since cash is the most liquid of all assets, a business cannot survive and prosper if it does not have adequate control over its cash.
Proper maintenance and its reconciliation with bank statements are crucial to a business some business concerns maintain cash book instead of cash receipt journal and cash payment journal. Journal in which all cash receipts and payments including bank deposits and withdrawals are recorded first, in chronological order, for posting to general ledger. A petty cash fund will undergo periodic reconciliations, with transactions also recorded on the financial statements. Lesson plan petty cash book jobs, employment freelancer. The petty cashier of john and james company paid cash for the following expenditures during march 2018.
A petty cash is a cash book used to enter all small or petty expenses obtained. Petty cash is stored in a petty cash drawer or box near where it is most needed. A small amount of cash kept on hand by a business for incidental expenses. For this purpose, a petty cashier is appointed by the chief cashier. The information in your petty cash book is part of a larger accounting system that explains your companys financial activity for tax purposes and also distills.
Petty cash book explanation, format, example, ordinary and imprest. The following are the main advantages of maintaining a cash book. There might be a petty cash fund, which can be a drawer or box. If i like the way you work, i am willing to keep working with you long term for my future projects. It is a ledger in which both cash receipts and cash payments are recorded. Cash book is regularly reconciled with the bank statements as an internal auditing measure. Definition and explanation of cash book format, advantages. In order to put money into the petty cash account, money has to be taken out of the business checking account. Information and translations of petty cash in the most comprehensive dictionary definitions resource on the web. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. It is another cash book which is maintained, generally, in large business.
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. A petty cash book is a record of smallvalue purchases before they are later transferred to the ledger and final accounts. Meaning of petty cash book, its importance and advantages. Petty cash book can be maintained either in a simple or in analytical way. The establishment of a petty cash system begins by making out a check to cash, cashing it, and placing the cash in a petty cash box. It can be used literally to mean the actual bills and coins you have available to spend, including the amount in your petty cash fund. A petty cash book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure. Cash is the asset that has the greatest chance of going missing and this is why we must ensure that we have strong internal controls build around the cash process. The employee, who keeps the petty cash book, is called petty cashier. Recording of transaction in cash book and journal with. The petty cash book is a recordation of petty cash expenditures, sorted by date. In accounting and finance, cash includes, currency notes made of paper, coins, demand deposits, money orders, checks and bank overdrafts etc.
Petty cash has its own asset account and is reconciled at the end of every period. Cash is the asset that has the greatest chance of going missing and this is why we must ensure that. Each entry in the petty cash book should include the date, the amount, and what was purchased with the petty cash. How are single, double and triple column cash books written. Also known as a two column cash book, a double column cash book is the one which has a bank column in addition to the regular cash column. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. The book in which all cash transactions either cash is received or paid are primarily recorded according to dates, is called cash book. This is recorded as a separate account in the companys general ledger. A petty cashier makes a detailed analysis of petty payments and records under suitable heads, i. 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.
In larger firms, it is commonly divided into two parts. To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking. Cash float is the term for the total amount of checks in between the time when the check is written and taken off the books of the payer, but not out of their bank account, and before its in the. The credit side consists of several analysis columns. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Surprise cash counts must be conducted time to time to ensure the accuracy of the cash balance stated in the petty cash register the amount of petty cash float should not be set too high since petty cash register does not form part of the double entry system, payments made through petty cash are subsequently posted into the cash ledger and the. This is the only amount of cash that is not immediately deposited in the bank account after it is received. Petty cash, also known as imprest cash, is a fund established for making small payments that are impractical to pay by check. Relatively small amount of cash kept at hand for making immediate payments for miscellaneous small expenses. Require that employees maintain a running petty cash log for every transaction, including receipts. How the imprest system of petty cash book works your.
Accounting for petty cash explanation, related controls and. These are not real waec gce book keeping questions but likely repeated questions over the years to help candidate understand the nature of their examinations. Petty cash is a small reserve of cash kept onsite at a business location for incidental cash needs. Petty cash is a fund your business keeps on hand for small purchases, while cash on hand is the sum of all your available cash. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established. Petty cash book is a type of cash book that is used to record minor regular. Petty cash is the small amount of cash that is kept on hand by a company to pay for minor, inexpensive purchases during the normal course of operations. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals.
Petty cash book definition, types, format, examples imprest and. Companies use these funds to buy small items like office supplies and postage instead of going through the hassle of writing a check for. 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 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. 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. Thus, the book is part of a manual recordkeeping system. These small expenditures are usually paid using coins and currency notes rather than checks. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and. Just like the other type of books, it records receipts from cash and bank on the left side and payments on the right side.
In most cases, the petty cash book is an actual ledger book, rather than a computer record. The additional analysis columns are used to analyze expenditures as they arise. Some accountants term cash book as a journal and some other term it as a ledger. When the cashier requests for reimbursement of petty cash, he creates a petty cash voucher detailing the payments made through petty cash during the. A cash book is a type of subsidiary book where cash or bank receipts and cash or bank payments made during a period are recorded in a chronological order. Cash book definition, example and format of cash book.
The petty cash book is a formal summarization of petty cash expenditures, sorted by date. Ensure to take note of every questions provided on this page. Cash that a company keeps available for small transactions with customers. Jul, 2019 the imprest system is an accounting system for paying out and subsequently replenishing petty cash. Cash is a current asset which consists of items used in day to day financial transactions as medium of exchange.
This type of cash book usually uses the imprest system. Explain the term imprest system 2 discuss the double entry. Similarly, when cash is paid out the same is recorded on the credit or right hand side of the cash book. Here we discuss the format of petty cash book, types of petty cash systems. 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. A petty cashier receives a fixed amount of money from the head cashier with which he meets petty expenses of a certain period and records in chronological order of dates in the petty cash book. Petty cash meaning in the cambridge english dictionary. Before the rise in the use of credit cards and charge cards, nearly all companies used petty cash accounts to allow employees responsible for purchasing small supplies to do so with minimal hassle. Always the voucher would show the amount, purpose, recipient, general ledger account number and date relating to the expenses.
In almost all businesses, it is found necessary to keep small sums of ready money with thecashier or petty cashier for the purpose of meeting small expenses such as postage, telegrams, stationary and office sundries etc. During an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. The cash book is regularly reconciled with the bank statements as an internal auditing measure. 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. Petty cash is a small amount of cash that is kept on the company premises to pay for minor cash needs. Petty cash book explanation, format, example, ordinary. 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. Petty cash book explanation, format, example, ordinary and. Here we detail about the three types of cash book, i. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field.
The balance of cash book and cash of a cash box must be equal. What is the purpose of maintaining a petty cash book. Definition of petty cash petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory. All cash transactions are primarily recorded in it as soon as they take. Simple cash book contains only one amount column on each side debit and credit for recording cash receipts and cash payments. 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. Once you have the basics covered, you need to put money into petty cash. Petty cash balance after reimbursement reverts to back to the level of the float.
Examples include postage due, reimbursement to employees for small purchases of office supplies, and numerous similar items. The term petty cash derives directly from the word petty meaning minor. Petty cash was a small amount of cash that was kept aside for trifling purchases, too small to require the effort of the making out and cashing of a cheque. There are two primary types of entries in the petty cash book, which are a debit to record cash received. 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. Nov 27, 2019 the imprest petty cash system is a method of accounting for petty cash expenses. Jul 16, 2019 petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. Accounting for petty cash explanation, related controls. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. Explain the term imprest system 2 discuss the double entry system applicable to from acc 101 at abe international college of business and accountancy tacloban branch. 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. You should write a check to the custodian to initially establish the fund.
Petty cashier is a person, who maintains the petty cash book. The imprest system is designed to provide a rudimentary manual method for tracking petty cash balances and how cash is being used. Most companies set up a special fund called a petty cash fund for small purchases and office expenditures. Columnar petty cash book and its preparation process.
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