A petty cash book records small cash transactions in separate accounts. As head cashier checks the accounts of previous month and gives advance for the. 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. Mar 30, 2015 cash accounting sometimes provides tax benefits. What are the advantages of maintaining a petty cash book. Petty cashier is a person, who maintains the petty cash book. 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 a c, in the ledger separately. It is possible to find out daily cash and bank balance.
Double column cash book explanation, format, example. The system is a form of managing petty cash in a business. Recording of transactions in a petty cash book is easy. The petty cashier of john and james company paid cash for the following expenditures during march 2018. 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. It is both a book of original entry as well as a book of final entry. This is why cash transactions are recorded in a separate book named cash book. Advantages and disadvantages of receipt and payment account the main advantages and disadvantages of preparing receipt and payment account can be pointed out as follows. Petty cash book is maintained by the petty cashier. Recording in petty cash book saves time and efforts of the chief cashier. Petty cash book the cash book as seen above is used for recording all major payments. In other words, all credit transactions are finally settled by cash. Cash book also serves the purpose of book of original entry as well as ledger. Advantages of using petty cash disadvantages of using petty cash highlights of petty cash fund policy.
All cash transactions are primarily recorded in it as soon as they take. Payments in cash of small amounts like traveling expenses, postage, carriage etc. General cash book is subdivided in the single column, double column, and treble column cash book. In almost all businesses, the bulk of transactions related to cash receipts and payments. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. Due to lack of control, petty cash are always in a chance of misappropriating of the fund.
A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Here we detail about the three types of cash book, i. The date of each transaction is recorded in this column. 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. Simple cash book contains only one amount column on each side debit and credit for recording cash receipts and cash payments. Recording in a petty cash book does not require formal knowledge of accounting principles and techniques time saving. To get a clear picture of how it looks, go through the following format. Petty cash book can be maintained either in a simple or in analytical way. Petty cash book is used for recording payments of small expenses, which are of smaller denominations such as postage, stationery, conveyance, refreshment, etc.
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. While convenient for small purchases, it is not a realistic solution for larger expenses. Using imprest, the petty cash of a company is kept at a constant rate. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. 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 would be susceptible to a accounting errors because it has no sufficient documents for tracking the cash. In an analytical petty cash book, there exists separate heads for different petty expenses, which makes recording much easier. The main advantages of petty cash book publish your article. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. Person who maintains petty cash book is known as petty cashier and these small expenses are termed as petty expenses.
The credit side consists of several analysis columns. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. 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. Jun 18, 2019 the format of a triple column cash book is given below. An expense that classifies as a small amount or not differs from company to company. To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking.
It is usually embedded in money management or finance related softwares. The advantages of analytical petty cash book are given below. Cash and bank transactions can be recorded in cash book. Petty cash book 2019, imprest system of petty cash. A petty cash book is used to maintain a record of expenses incurred of a small amount. The discount cash customers get is less than the cost of the credit card processing fee, so retailers still come out ahead. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. A petty cash can be theft by the employees of the organization. In order to make the task of the cashier simple, these small and recurring expenses are recorded in a separate cash book called petty cash book and the.
In this book, separate columns are provided for usual head of expenditure. Petty cash book explanation, format, example, ordinary and. Since there are no sufficient documents for tracking the petty cash sometimes, petty cash may result in accounting errors. Disadvantages of maintaining petty cash book there are several disadvantages of maintaining a petty cashbook which are as follows. In most cases, the petty cash book is an actual ledger book, rather than a computer record. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. Apr 07, 2020 petty cash book the cash book as seen above is used for recording all major payments. A petty cash is a cash book used to enter all small or petty expenses obtained. Petty cash book relieves the main cashier because it is prepared by the petty cashier.
Advantages and disadvantages of receipt and payment. Cash book contains cash transactions passing into and out of a business. Petty cash is money on hand what are the disadvantages of cash flow. In other words, we can say that if we add a bank column to both sides of a single column cash book, it would become a double column cash book. Petty cash book meaning, cash book vs petty cash book. What is the main use of a petty cash book in accounting. Petty cash book format example definition explanation. Overall, petty cash is a largely outdated and inefficient system. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. 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 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. For recording transactions in the simple cash book, the foremost step is to understand. Cash book could be a checking or other type of money access account.
It gives a quick overview of how much cash has been achieved and how much have been paid in column format. But, in every business a number of petty small payment like that for postage, carriage, stationery, entertainment, cartage, conveyance etc. Advantages and disadvantages of analytical petty cash book. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. Cash also saves vendors money, and some pass the savings on to you through cash discounts. Retailers pay a fee every time they swipe a credit card. Petty cash is a comprehensible and common method of paying for business operating cost. Cash book the cash book is a ledger in the sense that it is designed in the form of a cash account and records cash receipts on the debit side and cash payments on the credit side. What is similarity between cashbook and petty cashbook. Cash book definition, explanation types and advantages.
Definition and explanation of cash book format, advantages. Wherever possible, local units should use the pcard instead of petty cash. Meaning of petty cash book, its importance and advantages. If a company is big in size, it becomes quite a tedious task for the. Petty cash book 2020, imprest system of petty cash advantages by caknowledge team last updated apr 29, 2020 0 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. Advantages of petty cash book october 1 july 49 june 14 may. The petty cash book is an official summarization of petty cash expenditures, sorted by date. Frauds involving cash are likely to be minimized and where committed are likely to be detected at an early stage. It simply includes debit column, credit column, reference number and date of that particular transaction. This reduces your net income and, as a result, can lower your tax payments for the 2014 tax year. Many expenses of small nature are recorded in petty cash book. What are the main advantages of maintaining cash book. The head cashier gives the petty cashier a stipulated sum of money to pay f. 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. A petty cash book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure.
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. An imprest system of petty cash is used for more control over cash in hand. These are expenses which are incurred day after day. Petty cash book 2019, imprest system of petty cash advantages. 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. To save money, some offer their customers a discount for paying with cash. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and. Under the cash method, any customer payments you receive in 2015 for projects completed in the previous year would be counted as income for the 2015 tax year. This makes the entire petty cash system susceptible to abuse. Cash book takes into account the cash payments and cash receipts. What is petty cash book write the advantages of petty cash. The following are the main advantages of maintaining a cash book. The elements of a cash book can be understood as follows.
University policythe purpose of a petty cash fund is to provide cash to business units sufficient to cover minor expenditures. Petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. What are the advantages of a imprest system for petty cash. March 9, 2020 others accounting treatment of petty cash, benefits of maintaining petty cash book, disadvantages of maintaining petty cash book, examples of petty cash expenses, petty cash ajsh admin petty cash fund or simply petty cash may be defined as a small amount of money available for making payments related to small expenses without. The double column cash book also known as two column cash book has two money columns on both debit and credit sides one to record cash transactions and one to record bank transactions. What are the advantages of using the imprest system. Petty cash book explanation, format, example, ordinary. What are the advantages of the petty cash book answers. When petty cash is easy to get to employees, it is a suitable way to pay for little purchases.
Columnar petty cash book and its preparation process. Entries in the cash book are then posted into the general. Main cashier can focus on other major financial transactions of the business. What is the different cash book and petty cash book. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount.
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