Petty cash book definition

This is different from bookkeeping which is the process of recording your company’s financial transactions into organized accounts. Balancing of a petty cash book is done at the end of an accounting period. The columns for “payments” and “expenses” are totalled and it equals the total in the “Total Payment” column.

• In the imprest system, the head cashier controls petty cash.
• It is called an analytical cash book because it analyses the expenses into a number of grouped expenses.
• Therefore, the total debits in the ledger agree with the credit in the main cash book.
• Petty Cash Float is the amount of physical cash with the petty cashier.
• A petty cash book is just as its name suggests a book which is used for the purpose of recording small amounts of expenses in a business.

Hence, all such transactions are booked under the petty cash account. Particular cash that is used to pay for day-to-day petty expenses in a firm is called petty cash. The cash book is the main book, whereas the petty cash book is in support of the cash book. The petty cash book reduces the burden of larger and heavy amounts of cash paid or received. Thousands of challenges arise, and hundreds of problems must be solved daily while managing an organization’s finances. Petty cash expense and maintaining a petty cash book is one such challenge that you must never take lightly.

What is Petty Cash Book?

Whenever a petty cashier makes a payment, they issue a voucher and report the same into the petty cash book. Hence, the cashier debits the Sundry Expense account and credits the petty cash account. The main purpose of the petty cash book is to decrease the load of head cashiers or accountants to manage small routine transactions. A petty cashier is appointed to record, manage and reconcile the petty cash funds.

The petty cashier submitted the below expenses with their respective amounts for the current period amounting to 900. The cashier was advanced 1,000 as petty cash for the period. The petty cashier records the petty transaction and presents an expense report for reconciliation to the head cashier at the end of the period.

Example and Format of Petty Cash Book

In this regard, we’ll create a drop-down list from the Group section from which you can choose instead of typing. The reconciliation of petty cash is very important to save any fraudulent use of petty cash. Where the volume of expenses is higher in sundry expenses, you can directly debit each expense account.

At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. At any time, the total of petty cash balance and all expenditures that have not been reimbursed to the petty cashier is equal to the agreed float. It is extremely difficult for one person to record all cash transactions in a single cash book. As a result, the petty cashier keeps track of petty expenses in a petty cash book and presents them to the chief cashier at a predetermined time. A PCB is a manual process for keeping track of expenses that is frequently rife with mistakes. Additionally, particularly in big businesses, keeping the accounts and recording every transaction can become tedious.

Download Petty Cash Book Template (Excel, OpenOffice Calc & Google Sheet)

Under the fixed system of petty cash, a fixed amount is given to the petty cashier for a fixed period of time. In all businesses, some payments are made by check for better control over cash. However, for the payment of small expenditures (e.g., stationery, travel, postage, and newspapers), paying by check is unreasonable. The difference between the sum of the debit items and the sum of the credit items represents the balance of the petty cash in hand. The petty cash entry section consists of 2 sides; debit and credit. After reviewing the head cashier will reimburse the spent amount and the petty cash amount is again equal to the agreed fixed amount.

In addition to the above, this article consists of definitions, types, processes, printable formats, journal entries, advantages, disadvantages, and much more about the petty cash book. It can be helpful to students as well as individuals to easily learn Petty Cash Management. The position opening times and prices of the petty cash book is similar to a subsidiary book. The petty cashier is always assumed to hold cash equal to the imprest account in the form of actual cash or paid-up PCVs. Record the following transactions in an analytical petty cash book for the month of January 2019.

Ordinary or Simple Petty Cash

Now let’s pick the columns one after the other
to enter the formulas and formatting. It is now time for me to walk you through the step-by-step guide to design and create your own petty Cashbook template using Excel. The
Petty Cashier makes all the payment for which he is authorized out of the
impress money. The Cashbook may become too bulky to manage
and the cashier may be loaded down and may lose focus on high-value
transactions. Keeping a petty Cashbook is a very smart practice for a business. It is of great value to safeguard and control cash effectively.