The list of petty cash purchases is kept in a book and is organised by date. This petty cash book is typically a ledger, not a digital record. The accounting department uses a manual record-keeping method, which includes the petty cash book.
The petty cash book primarily contains two different kinds of entries:
- Which is a debit to document the cash that the petty cash clerk receives, which is often in a single block of cash at irregular intervals.
- The cash withdrawals from the petty cash fund, which include payments for things like flowers, stamps, meals, office supplies, and so on, are reflected in a significant number of credits.
Keep reading to learn more about the petty cash book in detail.
What is the Petty Cash Book?
The petty cash book refers to the record of the small expenses that are organised according to date. It often acts as a physical ledger and not a digital record. Therefore, the book is a part of the manual data-keeping system. As companies gradually stop using petty cash owing to company credit cards, the importance of the petty cash book seems to have experienced a setback.
Advantages of Petty Cash Book:
- Simple method: It is simple to enter transactions in a petty cash book. Several headings for various petty costs are present in an analytical Petty Cash Book, making recording simpler. Formal training in accounting concepts and procedures is unnecessary for recording transactions in a Petty Cash Book.
- Time-saving: The chief cashier might save time and effort by recording in the Petty Cash Book.
- Efficient control: Frauds and mistakes are less likely since the principal cashier audits the Petty Cash Book at the end of each period.
- Convenient handling: Petty Cash Book recording is handy since entries must be made under distinct headings, which facilitates and speeds up posting.
- Low Probability of Fraud: As the petty cashier is not permitted to withdraw money whenever he pleases, the defalcation of cash might be reduced.
- Specialisation in Work: Due to the fact that the transactions are documented in two different books, the chief accountant might profit from specialisation- the Petty Cash Book and the Main Cash Book.
- Reduction in Petty Expenses: Petty cash expenditures must stay within the confines of imprest since the petty cashier can never exceed the allotted petty cash limit.
Operations Of Petty Cash
In most businesses, cheques must be used for all cash payments. However, payment by cheque is not followed when it comes to petty cash. Commercial organisations have a variety of ongoing costs, such as those for office supplies, postage, transportation, etc., for which a check payment is not an option. To manage little costs, a petty cash book can play a major role in your company.
Types of Petty Cash Book
The petty cashier receives the money in accordance with the following petty cash system rules: –
Ordinary Petty Cash System
The petty cashier is given a lump sum of money under this arrangement. The cashier is in charge of keeping track of all expenditures for the chief cashier’s evaluation. Before obtaining additional cash to resume running the daily expenses, they must first demonstrate it.
Petty Cash Imprest System
In accordance with this system, the petty cashier receives a certain amount of money at the start of each period to cover the petty costs incurred during that time. The petty cashier gets their money back after the time. The petty cashier will thus start the following period with the same predetermined amount of money.
Final Notes
A petty cash book makes small payments inside a company or organisation easier. It provides for stationery, bus fares, postage, and stamps. It is placed in the care of a petty cashier and is used to cover daily costs. The petty cashier can operate it as an impress or standard cash book system, which accounting companies will eventually utilise to create the accounts.