Petty Cash Book

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Deepthi Sharma wrote on in Accounting | Read 740 times.
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Petty Cash Book

            It is another Cash Book which is maintained in large business concerns to reduce the burden of 'Main Cash Book', in which numerous transactions involving petty (small) amounts are recorded.

           Petty Cash Book is maintained to record small expenses such as postage, stationery, telegram. A separate column is allotted for each type of expenditure. 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.

         The fundamental difference between the Main Cash Book and the Petty Cash Book is that only petty expenses are recorded in the Petty Cash Book.

But in the main Cash Book all receipts (big and small) and large expenses are recorded.

Thus, we see that in large organizations both the books are essential, although the importance of the Petty Cash Book is less than the Main Cash Book.

Thus, the book in which small payments, which are not convenient to record in the Main Cash Book, (like postage, traveling expenses, purchase of stationery etc.) are recorded is called Petty Cash Book.

Systems Of Maintaining Petty Cash:

Three different systems are being used for maintaining petty cash. These systems are:

  • Open system or ordinary system of petty cash.
  • Fixed system of petty cash.
  • Imprest system of petty cash.

Open System:

Under this system the Petty Cashier at first receives from the Chief Cashier a fixed sum of money for meeting petty expenses. As soon as the said amount is spent, the Chief Cashier again pays the required sum to the Petty Cashier.

Fixed Advance System:

Under this system the Petty Cashier receives from the Chief Cashier a fixed Slim of money for a fixed period of time i.e. Rs.2000 per month. The Chief Cashier will pay Rs.2000 to the Petty Cashier every month irrespective of this that whether the Petty Cashier has spent the total sum or not.

Imprest System:

This system is followed by most of the business concerns. Under this system, the total petty expenses for a particular period are estimated and that amount is advanced by the Chief Cashier to the Petty Cashier. This amount is called Imprest Cash. On the expiry of the fixed period the Petty Cashier prepares a statement of his expenses and submits it to the Chief Cashier. This statement is known as Statement of Petty, Expenses. 

In this post we have learnt regarding petty cash book and its types soon we will come back with new topic.


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