Cash book contains cash transactions passing into and out of a business. We have created a simple and readytouse petty cash book excel template with predefined formulas that are useful for businesses of all sizes. Ensure to take note of every questions provided on this page. It can be noted that it uses the term petty which actually fits its definition since petty cash fund is used for transactions paid in small amounts. The main advantages of petty cash book publish your article. 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. There might be a petty cash drawer or box in each department for. Also included as a part of cash are the balances kept at banking and financial institutions. The petty cash book is an analysis book that records all small cash transactions such as the purchase of postage stamps and gas for office car. These are expenses which are incurred day after day. However, purchases made using cash are sometimes easily forgotten, difficult to track and ultimately challenging for accounting. Petty cash accounting procedures reconciliation uses. 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.
Meaning of petty cash book, its importance and advantages. For recording transactions in the simple cash book, the foremost step is to understand. A separate column is allotted for each type of expenditure. Petty cash is an easy to understand and familiar method of paying for company expenses. To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking. As the petty cash total declines, the receipts should increase. The custodian maintains the petty cash fund in a constant state of reconciliation. Books of prime entry objectives identify and define the types of books of prime entry explain the purpose of using special journals state the type of transactions recorded in each book state the source documents associated with each book 12 g 1. It should be used in conjunction with procedural information, resources, and forms, which outline the application of this policy and may be found on the petty cash administration section of the gateway to financial activities website fingate.
Require that employees maintain a running petty cash log for every transaction, including receipts. Simple cash book contains only one amount column on each side debit and credit for recording cash receipts and cash payments. However, failing to hold employees accountable for petty cash may encourage theft or inappropriate use of company resources. The amount paid by the petty cashier indicates the summary of expenses which are debited and petty cash account is credited. Is there a better way to solve the small expenditure dilemma. 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. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. Conclusion as a business grows, the number of transactions increases and it becomes necessary to separate the transactions and record in different journals. In all kinds of businesses, employees would have to handle petty cash at one time or another and it would be very useful to record everything in a petty cash log.
Analytical petty cash book an analytical petty cash book is one in which there is one amount column in its debit side and a number of columns on its credit side for different heads of expenses. Petty cash has long been a quick method of providing funds for employee purchases. May 21, 2019 examples of source documents, and their related business transactions that appear in the financial records, are. Enter the following transactions in the book of ehi.
They make it easier to retrieve information on debtors and creditors, saves time and eliminates many details from the ledger. When cash is added to a petty cash fund, the basic concept is to replace the amount of any cash that had previously been disbursed from the fund. This involves summarizing all disbursements made and issuing cash back to the fund for that amount. For example, you might send an employee to pick up office supplies, like staples or printer paper. No money should be disbursed from the petty cash fund to reimburse a person unless a paid receipt or invoice is presented. Petty cash, or petty cash fund, is a small amount of cash your business keeps on hand to pay for smaller business expenses. 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. Each entry in the petty cash book should include the date, the amount, and what was purchased with the petty cash. Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque. This is the simplest form of cash book and is used in businesses where payments are made and received mostly in cash and where usually no cash discount is received or given. How the imprest system of petty cash book works your business. The debit column is used for entering the balance of cash in the hand of petty cashier at the beginning of the period and the amount received from the head cashier. Many expenses of small nature are recorded in petty cash book. Click here to download petty cash book excel template.
Due to lack of control, petty cash are always in a chance of misappropriating of the fund. A petty cash book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure. Receipts must be provided for authorized purchases. Click here to download all accounting excel templates for rs 199. Thus, every time petty cashier begins the next period with the same amount of float, under this system, petty cash fund is reimbursed for the petty expenses incurred is called impress systems of the petty cash book. Read on for more information on petty cash book advantages, format, systems, and example. Adams petty cash 2part carbonless receipts book, 2. Sep 30, 2019 petty cash has long been a quick method of providing funds for employee purchases. Simple petty cash book a simple petty cash book is one in which there is only one amount column on its both sides with common date and particular column. The amount entered in the sales book is on behalf of invoices supplied to purchasers, however, a copy remains with the firm.
Bought goods on credit from layi 10 rulers at n 50 each 16 exercise book at n 120 each january 12. The most common way of accounting for petty cash expenditures is to use the imprest system. The purpose of a petty cash fund is to provide business units with sufficient cash to cover minor expenditures. Meaning of petty cash book a petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically. It is one of the secondary book of accounts and unlike cash sales which are recorded in cash book, sales book is only to record credit sales. Petty cash book is maintained by the petty cashier. Simple petty cash book has only one payment column where all payments into different groups and post it to respective ledger.
Waec gce book keeping questions 2020 objective and theory. Basically a petty cash log template can be easily done in any spreadsheet softwaresuch as microsoft excel wherein youd create a format with columns to record all the important. Uses of petty cash book its a cash book used to enter daily petty expenses. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. When you need to make a small purchase such as a book of stamps, take a ten or twenty out, make your purchase, and when you returnput the petty cash receipt remember to always get a receipt and change back in the box. 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. Under the expenditure, we understand small payments that you cant make with a credit card or use a check. Petty cash book format example definition explanation. 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. These are not real waec gce book keeping questions but likely repeated questions over the years to help candidate understand the nature of their examinations. Meaning, types and importance of petty cashbook srd law.
Notes on systems of petty cash fund grade 10 accountancy. 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. Read this article to learn about the following types of cash book and its preparation, i. Since the petty cash book analysis the expenses into a number of heads of. Examples of source documents, and their related business transactions that appear in the financial records, are. 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. Download petty cash book excel template exceldatapro. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. Youll also want to purchase a lock box for the cash and receipts. The amount entered in the sales book is on behalf of invoices supplied to purchasers, however, a copy remains with the firm sales book is also called a sales journal or sales day book. Petty cash book can be maintained either in a simple or in analytical way. Sales book records all credit sales made by a business. Place the current date on the date line of the check. Dec 17, 2019 cash book in accounting the cash book is a chronological record of the receipts and payments transactions for a 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. In some cases, a description field is provided to help the petty cashier feed insufficient information about every purchase. A petty cash can be theft by the employees of the organization. General cash book is subdivided in the single column, double column, and treble column cash book. If there is a petty cash book, the custodian enters the amount of the cash received in the book, and updates the running total of cash on hand. The cash book is updated from original accounting source documents, and is therefore a book of prime entry and as such, can be classified as a special journal. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. Also, find out its uses and functions in any contemporary business setup. Write petty cash on the pay to the order of line of the check. This contains a number of adjustments to a companys book balance of cash on hand that the company should reference to bring its records into alignment with those of the bank. The cash book is updated from original accounting source documents, and is therefore a book of prime entry and as such, can be classified as a special journal unlike other special journals such as the purchases journal or the sales journal, the cash ledger book records debit and credit entries. Here we detail about the three types of cash book, i. A petty cash book takes in relevant details concerning purchases. Every business has a petty cash or a petty cash fund that is used for business operations like in giving change or in business travels.
The office establishes the petty cash fund for paying petty expenses incurred daily. How to set up and maintain a petty cash account basic. Write out the dollar amount in words on the appropriate line of. This guide memo outlines policy on establishing and managing a petty cash fund. The cashier gives the cash to the petty cash custodian, who includes it in the petty cash fund. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. Purchased on credit from ucha 15 shoes at n 400 each 16 shirts at n 120 each less 5% discount. Petty cash is a convenient alternative to writing checks for smaller transactions. The use of the petty cash account shall be restricted to miscellaneous petty or emergency expenditures, refunds legally payable by an agency, and for cash change to be used in the transaction of the agencys official business. State the type of transactions recorded in each book state the source documents associated with each book 12 g 1. Jul 16, 2019 the most important part of a petty cash system is the documentation of each transaction. Petty cash, also known as cash on hand, refers to small amounts of cash kept on hand in a business. This petty cash book is prepared on the same lines of the simple petty cash book. Functions of books of prime entry transactions source documents books of prime entry 12 g 2.
Petty cash book helps in making the records of cash transactions uptodate because of division of labor in recording cash transactions. Whenever possible, local units should use the pcard. Books of prime entry journals cash book petty cash book ledger special journals books of prime entry general journal 1042012 mr kong 3. The petty cash and change fund reconciliation page 7 must be completed quarterly and submitted to the internal auditor. If you start running such a book, you will need to make a fresh entry each time you spend your money small. Below is a breakdown of all columns and information contained in a petty cash book. 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. For this purpose, a petty cashier is appointed by the chief cashier. The credit side consists of several analysis columns. The petty cash custodian is charged with distributing the cash and collecting receipts for all purchases or any uses of the funds. This requires additional labour and time, therefore businessmen do not use simple petty cash book in practice. 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.
Petty cash book definition, types, format, examples. Documenting transactions is the way a business documents business expenses for tax purposes. Petty cash book saves time because each payment under particular head is not posted into the ledger separately. The problems with petty cash are largely embodied in its name.
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. Mar 28, 2019 to account for petty cash, create a transaction log that covers the date, the person who used the petty cash, a description of the transaction, and any other deposits or expenses. The cheques are drawn periodically for petty expenses and debited to petty cash account from the cash book. 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. Welcome an effective accounting tool that will help you keep track of your cash expenditure. By keeping track of all petty cash transactions no matter how petty you have records to back up deductions for those small business expenses. The use of books of original entry promotes the division of the ledger which assists management in data analysis. Petty cash is the small cash reserves that businesses keep on the. To account for petty cash, create a transaction log that covers the date, the person who used the petty cash, a description of the transaction, and any other deposits or expenses. Before the rise in the use of credit cards and charge cards, nearly all companies used petty cash accounts to allow employees responsible for purchasing small supplies to do so with minimal hassle.
Cash includes currency and coins, although most businesses do not keep much of this type of cash around. It is an accessible, convenient way to pay for small purchases. Print out a petty cash form or petty cash vouchers and keep in the locked box with your petty cash. The cash book is a chronological record of the receipts and payments transactions for a business. Petty cash would be susceptible to a accounting errors because it has no sufficient documents for tracking the cash. The posting is made with the periodical total at a time. Cash book, pass book, bank reconciliation statement dr. If receipts are not issued for a type of expense incurred e. The heads of expenditure are not required to be separately posted in the ledger. Sep 19, 2019 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. Employees have to request the cash, usually by filling out a form. The procedure for petty cash funding is outlined below complete reconciliation form.
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