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.
Advantages of Imprest Petty Cash Book:
The following are the few advantages of imprest petty cash book:
- Labor minimization.
- Control over petty expenses.
- Verification of arithmetical accuracy of petty expenses.
- Opportunity for the petty cashier to work comfortably.
- Determination of expenses.
- Fixed imprest fund.
- Prevention of misappropriation.
Under the imprest petty cash system as the totals of different heads of expenditures are posted in ledger accounts after a certain period, the workload of a cashier is minimized to a great extent.
Control over petty expenses:
Under imprest, petty cash book system petty cashier submits a statement of expenditure to the head cashier at an interval of a certain period and thereafter receives funds from him for further expenses.
The head cashier before funding again examines the previous expenses. Thereby the possibility of fraud and forgery is removed and there remains control over expenses.
Verification of arithmetical accuracy of petty expenses:
Under imprest, petty cash book system petty expenses are recorded in chronological order of dates. After a certain period, the amount of total expenses is sorted out and the amount of every head of expenditure is totaled separately.
The total of expenses recorded in various columns is equal to the total of expenses of total columns which proves that recording of expenses is arithmetically correct.
Opportunity for the petty cashier to work comfortably:
As the petty cashier does not collect cash, he can pay more attention to the expenses incurred and their proper recording.
Determination of expenses:
Under this system, it is possible to ascertain and know the number of expenses of the same nature of each column separately for a particular period.
Fixed imprest fund:
The head cashier remains always aware of the cash given to the petty cashier under this system. The head cashier does not have any problem to know the exact cash of the petty cashier as a fixed amount of cash always lies with the petty cashier.
In it, the head cashier can comfortably close accounts.
Prevention of misappropriation:
Under this system, it is almost impossible on the part of the petty cashier to misappropriate the fund because the head cashier does have full control over the petty cashier.
In this post we have seen the advantages of imprest petty cash book. Soon will come with a new topic.