5 advantages of petty cash book

Since only the total of various small expenses are recorded in cash book. Petty cash book saves the valuable time of main cashier because it is maintained by the petty cashier. Petty cash book explanation, format, example, ordinary. Small or large companies maintain 2 types of petty cash book for all cash transactions of a business. These types of transactions require more time and paperwork to complete. 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 book 2019, imprest system of petty cash 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. 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. It also saves time in posting each item of petty payments unnecessarily in the ledger.

All cash transactions are recorded in the cash book. Cash book contains cash transactions passing into and out of a business. Your policy might outline who handles the petty cash, when its okay to use it, required information before and after using petty cash, and how often it gets counted. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. It reduces the use of cheques and also avoids the inconvenience of issuing cheque for small payments maximum 500rupease. Petty isnt so small anymore, so think of it as small amounts that you might not think about tracking. Let us learn about the petty cash book and the various systems of maintaining the said. One major advantage of this analytical system is that it saves time. What are the advantages of maintaining a petty cash book. This 2part carbonless book can be used to document the receipt of petty cash. These are expenses which are incurred day after day. Jul 16, 2019 petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. Using imprest, the petty cash of a company is kept at a constant rate.

Tips keep the petty cash book and box or tin in a safe place, such as the accountants or managers office or cubicle. The term petty is used because it is small petite amounts of cash or cash like transactions. When petty cash is easy to get to employees, it is a suitable way to pay for little purchases. One of the primary uses of petty cash book is to keep a record of all minor expenditures for financial accountability reasons. What are the merits or advantages of maintaining a petty cash.

What are the merits or advantages of maintaining a petty. Analytical petty cash book the advantages of analytical petty cash book is given below. It is convenient that only the total of each column of expenditure will be transferred to general. General cash book is subdivided in the single column, double column, and treble column cash book.

Petty cash book definition, types, format, examples. Here we detail about the three types of cash book, i. The main advantages of petty cash book publish your article. Grade 9 cash book and petty cash book other quiz quizizz. 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. What is credit transaction today, will be cash transactions tomorrow. It is an accessible, convenient way to pay for small purchases. Simple cash book contains only one amount column on each side debit and credit for recording cash receipts and cash payments. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly. Person who maintains petty cash book is known as petty cashier and these small expenses are termed as petty expenses.

Fixed amount is paid to the petty cashier along with the imprest system. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. If like all other transactions cash transactions are also recorded primarily in journal, the cash aspect of the transactions will be required to be posted to cash ac, in. Understand how the imprest system works in the petty cash book. 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. The strong spiral binding allows pages to lay flat while writing, and the white, canary paper sequence provides a copy of all payments received. Sep 26, 2019 the first petty cash voucher of the month is numbered as 1, followed by the number of the month, e. At the beginning of the fiscal year, the petty cash fund is created. 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. In other words, all credit transactions are finally settled by cash.

This type enables the businessman to know the information about the amount being spent on each head of petty expense. The advantages of using a petty cash book can be summarized as follows. This is why cash transactions are recorded in a separate book named cash book. Notes on petty cash fund grade 10 accountancy petty cash. Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash. What are the merits or advantages of maintaining a petty cash book especially in large establishments. 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 advantages and importance of the petty cash book are as follows. Petty cash book maintains records of all petty payments systematically.

Meaning of petty cash book, its importance and advantages. Oct 14, 2017 a petty cash fund is generally kept so that employees of a business can make small purchases without having to requisition money, use a company credit or debit card, or have a check cut. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Petty cashier is not allowed to keep idle cash with him if the float is found to be more than adequate. This type of petty cash book is known as analytical petty cash book. Petty cash book relieves the main cashier because it is prepared by the petty cashier. Jul 16, 2019 petty cash describes small transactions of a business.

Keeping petty cash on hand for small purchases, however, allows employees to go around. What is the importance of petty cash in a business. As head cashier check the accounts of previous month and gives advance for the coming month, does, errors if any are reduced. In the 21st century, we have better ways to pay for small business purchases and keep track of. Simple cash book prepared like cash account in ledger. Simple method economy of time lesser chances of mistakes frauds can be minimized 8. Balances in the cash book are taken directly to the trial balance. Why petty cash is important for your business finances. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. Petty cash is a comprehensible and common method of paying for business operating cost. The following points highlight the importance and advantages of petty. Many expenses of small nature are recorded in petty cash book. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount.

In an organization thousands of cash transactions occur in a year and journalizing them all is tedious work. The petty cashier of john and james company paid cash for the following expenditures during march 2018. Petty cash book 2020, imprest system of petty cash advantages by caknowledge team last updated apr 29, 2020 0 petty cash book. There might be a petty cash drawer or box in each department for. Notes on petty cash fund grade 10 accountancy petty.

If like all other transactions cash transactions are also recorded primarily in journal, the cash aspect of the transactions will be required to be posted to cash ac, in the ledger separately. Cash book definition, types accounting format of cash book. It also serves the purpose of a ledger account and therefore, the cash account and bank acccount are not maintained in the general ledger. Nov 23, 2015 understand how the imprest system works in the petty cash book. The petty cash fund is an amount, which is maintained by government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. Petty cash book format example definition explanation.

The amount of float is so fixed that it may be adequate to meet petty expenses of the prescribed period. The advantages of analytical petty cash book are given below. Because of scientific recording, it is labor saving also. At the end of a period totals of all heads of petty expenses are transferred to a relevant ledger account.

Usually, the petty cash book are maintained on the basis of imprest system. The advantages of petty cash system enumerated are as follows. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. The pex visa prepaid card is issued by fifth third bank, n. This reduces the chances of misuse of cash by the petty cashier. Which of the following is an advantages of using a. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. The advantages of the imprest system are as follows.

For recording transactions in the simple cash book, the foremost step is to understand. 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. Recording of transactions in a petty cash book is easy. To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking. It is a special book that will record only one type of transactions cash transactions. Advantages of using petty cash disadvantages of using petty cash highlights of petty cash fund policy. Totals are carried forward from page to page until the end of the periods.

Petty cash book is maintained by the petty cashier. 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. Petty cash is an easy to understand and familiar method of paying for company expenses. Causes for difference between cash book balance and pass book balance. It makes records of all petty expenses are payments systematically. What are the advantages of using the imprest system. The main benefits or advantages of petty cash book can be pointed out as follows. Ppt petty cash book powerpoint presentation free to.

Petty cash book helps in making the major cash book more informative, clean and clear by including only major transactions. While checking the total of such expenses, the head cashier can put objections on undesirable expenses. Advantages, disadvantages, and the pex alternative. In the days when we paid for all small business transactions in cash, it was necessary to be intentional about keeping track of those transactions. Petty cash book definition the petty cash book is defined as relatively small amount of cash kept at hand for making quick payments for miscellaneous small expenses in the business concern. At the end of each month, the petty cash fund is reimbursed. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. A s the petty cashier has to produce to the chief cashier the petty cash book for inspection, it acts as a healthy check on the petty cashier. A separate column is allotted for each type of expenditure. The petty cashier is given a certain sum of money at the beginning of the fixed period e. The main advantages of imprest system of petty cash are as follows. Advantages and disadvantages of analytical petty cash book qs.

Main cashier can focus on other major financial transactions of the business. 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. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. Under this system, it is possible to ascertain and know the. The task of handling and recording small cash payments can be given by the cashier the person responsible for recording entries in the cash book to a junior member of staff. Advantages and disadvantages of analytical petty cash book. Notes on petty cash book grade 10 accountancy petty. Apr 29, 2020 petty cash book 2020, imprest system of petty cash advantages by caknowledge team last updated apr 29, 2020 0 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.

The additional analysis columns are used to analyze expenditures as they arise. The chief cashier is relieved from the cumbersome work of petty cash disbursement. Commission of fraud is reduced as the chief cashier verifies petty cash book along. The system is a form of managing petty cash in a business. The importance and advantages of petty cash fund are as follows. Nov 22, 2019 petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date.

What are the nature of transactions that are recorded in the petty cash book. Which of the following is recorded in a simple cash book. Petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc. All the cash receipts are entered in amount column on debit side and all cash payments are appeared on credit side of the amount column. Daily tasks of handling small cash transactions can be done by junior staff. Petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. Payments in cash of small amounts like traveling expenses, postage, carriage etc. Petty cash book can be maintained either in a simple or in analytical way. Sep 30, 2019 petty cash is an easy to understand and familiar method of paying for company expenses. Uses of petty cash book its a cash book used to enter daily petty expenses like cost of stationery, postage and xerox copy and so on. Just like the cash book, the petty cash book is both a book of original entry and a ledger account. As you set up the physical petty cash fund, its also a good idea to create a policy to oversee how employees spend the funds.

It facilitates for posting petty transactions in the bank cash book and budget sheet. Petty cash book 2019, imprest system of petty cash. The balance in the petty cash book shows cash lying with the petty cashier. For this purpose, a petty cashier is appointed by the chief cashier. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. Petty cash book explanation, format, example, ordinary and.