Petty Cash Book

Definition: Petty Cash Book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. For this purpose, a petty cashier is appointed by the firm, to pay for small payments (usually below Rs. 200) and keep a record of the same.

Petty cash implies a small amount of cash in hand, with the petty cashier, who uses the amount to pay for petty cash expenses.

Petty cash expenses are the expenses which occur regularly and repeatedly but are not related to the usual business line such as postage, stationery, stamp, carriage, travelling expenses, cartage, and other expenses (commonly recorded under sundry expenses). These expenses are high in frequency but too small in amount to pay through a cheque or credit/debit card.

Imprest System Petty Cash Book

In this system, the petty cashier is entrusted with a specified amount at the beginning of every month, fortnight or week. The cashier makes payment out of the amount granted to him. At the month end the petty cashier, after making payments from the amount, gives the payment voucher to the main cashier, who reimburses the amount to the petty cashier at the end of the month. So, the petty cashier will have the same fixed amount at the beginning of the next period.

This system is called the imprest system of petty cash and the amount so granted is termed as a float. The amount of float is decided in such a manner, that it may be sufficient to meet petty expenses, for the stipulated term. The balance left in the petty cash book indicates the amount remaining with the petty cashier.

Imprest system petty cash book is quite helpful when the firm uses analytical petty cash book, wherein the book has one column to track the receipt of the amount, from the chief cashier and several other columns to write down expenses under the specific head. The various columns are totalled to show the reason for making payments, and then the respective ledger accounts are debited.

The reimbursement of the amount is made by the chief cashier, to the petty cashier only when the latter prepares a statement that provides the details of all expenses with a date which are backed by vouchers, as well as the vouchers are arranged sequentially.

Format of Petty Cash Book

Petty Cash Book

The extreme left column of the petty cash book is to record the receipts of cash, then in the date column, dates on which transaction took place are recorded.

Next to the date column, there is a column to record the voucher number. In the particulars column, the purpose of an expense is written and simultaneously in the money column, of various expenses, the amount is recorded. There is a sundries column in the book, to record infrequent payments. Lastly, there is a total column, to record the total amount.

Advantages of Petty Cash Book

  • Saving of time of the main cashier.
  • Convenient recording of small transactions.
  • Effective control over cash payments.
  • Saving of efforts in recording small expenses in the cash book and then entering the same in the ledger.

The petty cashier balances the book periodically. The difference in the total receipts and total disbursements is the balance left with the petty cashier, which is carried forward to the next period as well as, he/she will be reimbursed for the amount actually spent.

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