Keeping a petty cash book prevents clustering of the cash book with minor expenses. Petty cash financial accounting simple book production. This is a poor business practice and you want to keep cash deposits and petty cash separate. Also included as a part of cash are the balances kept at banking and financial institutions. Like a general cash book, a petty cash book has a debit and a credit side. Transactions involving small amounts are numerous and burdensome to the main cash book, one good reason why a petty cash book is essential in financial management. When disbursing cash from the fund, the petty cash custodian prepares a petty cash voucher, which should be signed by the person receiving the funds. The employee, who keeps the petty cash book, is called petty cashier. This format makes it easier to record petty cash activity in the general ledger. A petty cash fund is generally kept so that employees of a business can make small purchases without having to.
To avoid multiple entries in the ledger 1 different books of prime entry can be maintained by different people 1. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. Difference between cash book balance and bank statement. Jan 10, 2019 petty cash, or petty cash fund, is a small amount of cash your business keeps on hand to pay for smaller business expenses. Documenting transactions is the way a business documents business expenses for tax purposes. Start your book by recording each and every expense and the purpose for which the fund was utilized. What is the importance of petty cash in a business. These balances include savings and checking accounts. Petty cash book explanation, format, example, ordinary.
Keeping petty cash on hand offers some valuable benefits. Cash includes currency and coins, although most businesses do not keep much of this type of cash around. The petty cash fund is an accounting tool that helps you to manage and track small purchases that are not appropriate to make a check payment or using your credit card. Avoid making the petty cash accessible to all employees, as this sets the stage for theft. Voucher is a form which shows what a payment is for. Petty cash covers costs like small office supply purchases, employee lunches, and postage and delivery fees. The imprest system check extravagant spending by the company.
As you pay for expenses out of petty cash, keep an itemized list of each expenditure. Jan 22, 2020 petty cash, which is kept in a petty cash fund, is a small amount of money you can use to pay for expenses. Petty cashier is a person, who maintains the petty cash book. The receipt column is used to record the opening balance and the amount received from the head cashier. By tracking and logging every petty cash transaction, your books will remain in order and youll no longer have to use funds from your own pockets. Jul 16, 2019 petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. When the cash is almost depleted, add up the expenses on your itemized list. Many expenses of small nature are recorded in petty cash book. The petty cashier is given a sum of money in the beginning of the period. Click to see full answer moreover, what is book of prime entry. Petty cash book definition, types, format, examples.
Outsourcing your bookkeeping with slc provides more. Petty cash book voucher for 1 mark each for 1 mark each b state one reason why a trader might use books of prime original entry. Manual or paper record keeping australian taxation office. Besides maintaining a main or general cash book, many companies also maintain a small cash book known as petty cash book to record.
The following are the advantages of keeping the petty cash book. The receipt column is used to record the opening balance. At end the firm reimburses him the amount paid by him so that the balance of cash with him. Petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. It helps the senior accounts officer or chief cashier to concentrate on more important work by leaving the keeping of the petty cash to the petty cashier. One of the primary uses of petty cash book is to keep a record of all minor expenditures for financial accountability reasons. The petty cash log is useful for keeping a running total of the balance left in the box a good way to ensure the box doesnt run short of cash. Small or large companies maintain 2 types of petty cash book for all cash transactions of a business. 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. Meaning of petty cash book, its importance and advantages. While checking the total of such expenses, the head cashier can put objections on undesirable expenses. In this book, separate columns are provided for usual head of expenditure.
During the period he makes payment out of this money. May 22, 2009 well basicly you are incharge of making sure, everything is recorded money in and out and you have the duty to make sure, petty cash is used accordingly, and no one has access to just take it. Each month, accountants or other employees will need to balance petty cash and replenish the funds. The benefits of using petty cash in your small business. Ppt petty cash book powerpoint presentation free to. Cash register tapes can be discarded after one month if. These small expenditures are usually paid using coins and currency notes rather than checks. Accounting the importance of a petty cash book it records all the petty expenses incurred in the organization it avoids the inconvenience of using checks to. Personally, i prefer to enter the vouchers into the accounting software on a timely basis and print the gl register as my log.
A petty cash book can either be a simple petty cash book or an analytical petty cash book. Petty cash book format example definition explanation. Ppt petty cash book powerpoint presentation free to view. May 14, 2017 the cashier creates a new check in the amount of the receipts, and swaps the check for the receipts. 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. Feb 26, 2021 petty cash is an easy to understand and familiar method of paying for company expenses. A free powerpoint ppt presentation displayed as a flash slide show on id. There are two reasons why the petty cash is to be kept.
Three different systems are being used for maintaining petty cash. Petty cash isnt usually a significant expense for your business. When creating a petty cash account, be sure to document the origin of the cash you use to start with, and also keep a petty cash book to track your every petty cash purchases. It is an accessible, convenient way to pay for small purchases. Petty cash is an easy to understand and familiar method of paying for company expenses. Ledger for petty cash record keeping large 120 pages business accounts petty cash log book by red tiger press jun 16, 2019 5. The cash book and the petty cash book are part of the double entry system and record cash coming in and going out. However, failing to hold employees accountable for petty cash may encourage theft or inappropriate use of company resources. Petty cash book template excel software accountant.
A petty cash voucher is a document or form that shows the amount of and reason for a petty cash disbursement. Petty cash book explanation, format, example, ordinary and. The petty cash journal entry is a debit to the petty cash account and a credit to the cash account. A cash book, or petty cash log, is a ledger for keeping track of small cash purchases. At any point in time, you will be able to prove to the irs that you are handling cash correctly and you will be able to prove to yourself that there is. 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. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses. Petty cash accounting procedures reconciliation uses. By following these procedures, you will have a system in place for handling cash that is traceable. For this purpose, a petty cashier is appointed by the chief cashier.
Keep this log readily available so you can fill it in on a regular basis taking the information off the petty cash vouchers. By keeping track of all petty cash transactions no matter how. This means that there are small amounts of money kept on hand in a particular business. In petty cash book, payments for petty items are recorded. These transactions may include office newspapers supply. A cash book and a cash account differ in a few ways. Petty cash book helps to keep the main cash book in a compact form because numerous entries for small and petty items are recorded in the petty cash book itself. Petty cash book definition, types, format, examples imprest and. Petty cash custodians are responsible for ensuring that petty cash expenses are appropriate and in accordance with university and local policies, disbursing cash from a petty cash account, documenting expenditures and keeping receipts, reconciling the account quarterly monthly, if sponsored funds are used, replenishing the account, and. In order to gain deep understand, please refer to the petty cash book example below. Petty cash log template and guide to using cash box. The petty cashier makes payments from this amount and records them in petty cash book.
It depends on the nature, volume and necessity of transactions of a business organization. Two types of petty cash book maintained by small or large companies for easy, quick and accurate recording of all cash transactions. To pay for the small purchases where payment is required. Dec 15, 2020 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. What is petty cash and why is it bad for your business. It helps the senior accounts officer or chief cashier to concentrate on more important work by leaving the keeping of the petty cash to the petty. 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. 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 company typically uses petty cash to make small purchases or reimburse employees for minor expenditures. Meaning of petty cash book and advantages of keeping petty. To make change for customers or patients to reimburse employees for items they have bought for your business. Required c i state the amount of cash there should have been in the petty cash box.
Petty expenses are recorded in petty cash book in chronological order of dates instead of the cash book. Why its important you know how to keep track of petty cash. Jun 17, 2020 the books of prime entry serve to capture transactions as soon as possible so that they are not subsequently lost or forgotten about. After all, if the annual financial statements are due at the end of the fiscal year, the irs doesnt only want to see the transactions done via debit or credit, but also a list of all. Having a petty cash account allows you to avoid the inconvenience of writing a check. At the end of a particular period, the petty cashier submits the petty cash book to the head cashier. You might want to also keep a petty cash log, but this is optional. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. The petty cash custodian refills the petty cash drawer or box, which should now contain the original amount of cash that was designated for the fund. The cash book is one of the most important accounting books for corporate bookkeeping. Your petty cash receipts should be stamped with a posted stamp when they are entered into the accounting system.
Petty cash is a small amount of cash on hand used for paying expenses too small to merit writing a check. Ledger for petty cash record keeping large 120 pages business accounts petty cash log book. Keep a book of petty cash to record the purchases you make with your petty cash fund. What are the advantages of maintaining a petty cash book. And theyre still the reason why most companies find it useful to keep funds on hand for minor, lastminute, or cash only expenses. Petty cash book explanation, format, example, ordinary and imprest.
These types of transactions require more time and paperwork to complete. Jun, 2019 the petty cash is also referred to as the cash in hand. Petty cash is a convenient alternative to writing checks for smaller transactions. At the end of the accounting period, the total of particular expenditure is posted to respective ledger. A cash book is a separate ledger in which cash transactions are recorded, whereas a cash account is an account. A petty cashier makes a detailed analysis of petty payments and records under suitable heads, i. Jul 24, 2018 main cash book does not become over bulky. The simple petty cash book has only two amount columns. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. These transactions may include office newspapers supply, causal labour, fuel, office coffee, bus fares, pins, and office cleaning among others. May 28, 2019 petty cash isnt usually a significant expense for your business. In the form of a simple document, often an excel spreadsheet, the cash book is used to record a companys cash payments.
Keeping large amounts of petty cash may also increase the likelihood of theft in your business. Start a petty cash fund by writing a check to petty cash. 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. As the petty cashier cannot draw as and when he likes, it prevents unnecessary accumulation of cash in his hand thus the chances of defalcation of cash are minimised. 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.
For example, you might send an employee to pick up office supplies, like staples or printer paper. Many expenses of small nature recorded in petty cash book, the number of. Oct 09, 2020 petty cash is a small amount of cash kept on hand to cover small, and often unexpected, expenses that pop up during a business day. Prepare a blank petty cash log utilizing a small book or you can use this free pdf template. Scroll down to step 2 below for a completed example. The head cashier scrutinises the petty payments and gives amount equal to the amount spent by petty cashier so that the total amount with the petty cashier. As the petty expenses are recorded by petty cashier hence the labor. Require that employees maintain a running petty cash log for every transaction, including receipts. Since only the total of various small expenses are recorded in cash book. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. Meaning, types and importance of petty cashbook srd law notes. Dmoreover maintaining petty cash book being rather simple.
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