Under this imprest system of petty cash book, the head cashier provides a fixed amount of money to the petty cashier in advance for meeting expenditure of a particular period. Double column cash book explanation, format and examples. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. When the account goes below a certain specified amount, the system is replenished. 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. Hector company gathered the following reconciling information in preparing its march bank reconciliation. Cash book, pass book, bank reconciliation statement dr. Double column cash book or two column cash book consists of two columns of amount on each side to record cash and bank transactions. 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. As we have discussed, one of the hardest assets to control within any organization is cash. 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. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. What is the importance of petty cash in a business.
There might be a petty cash drawer or box in each department for. Petty cash book is a formal book of recording petty expenses which are incurred in cash. It is another cash book which is maintained, generally, in large business. The purpose of a bank reconciliation accountingtools. At the end of the period, the petty cashier submits to the head cashier a statement of expenditures incurred by him. With this information, the senior executives can quell the doubts that financial commentators might have on the state of liquidity of the company and operational capacity of senior leadership. Petty cash is also the title of the general ledger current asset account that reports the amount of the companys petty cash. Keep the petty cash book and box or tin in a safe place, such as the accountants or managers office or cubicle. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. General cash book is subdivided in the single column, double column, and treble column cash book. In simple petty cash book there is one column each for recording of receipt of cash from the. Petty cash book explanation, format, example, ordinary and imprest.
A three column cash book or treble column cash book is one in which there are three columns on each side debit and credit side. In some cases, a description field is provided to help the petty cashier feed insufficient information about every purchase. The company maintains its own records from its perspective. Entries are needed to 1 establish the fund, 2 increase or decrease the balance of the fund. A triplethree column cash book to record cash, bank and purchase discount and sales discount. Petty cash book is the accounting book that is used for the purpose of recording. A bank reconciliation is used to compare your records to those of your bank, to see if there are any differences between these two sets of records for your cash transactions. The small cash transactions taking place a significant number of times daily if recorded in a general cash book may make it bulky and difficult to handle.
The following cash book examples provide an outline of the most common cash books. Required a state one advantage of the imprest system of petty cash. A petty cash voucher is usually a small form that is used to document a disbursement payment from a petty cash fund. In most cases, the petty cash book is an actual ledger book, rather than a computer record. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. The petty cash book is a useful control over petty cash expenditures, since it forces the petty cash clerk to formally record all cash inflows and cash outflows. 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. Petty cash book explanation, format, example, ordinary. The information in your petty cash book is part of a larger accounting system that explains your companys financial activity for tax purposes and also distills. Below is a breakdown of all columns and information contained in a petty cash book. These small expenditures are usually paid using coins and currency notes rather than checks. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. What is the purpose of preparing a bank reconciliation.
How to create petty cash account with excel youtube. Keep petty cash purchases small, for expenses like postage, parking meters or party supplies. If the petty cash is not used all that often or if there is a larger amount in the box, you may never use all of the petty cash. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. Define the purpose and use of a petty cash fund, and. 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. Learn vocabulary, terms, and more with flashcards, games, and other study tools.
A cash book has simplified the entry cash transactions for accounting purpose to a great extent. In these cases, the clerk can replenish what has been taken out once a month in order to keep track of the expenditures and help with the accounting of the petty cash. Petty cash book helps in making the main cash book more informative, clean and clear by including only major transactions. Petty cash book helps in making the records of cash transactions uptodate because of division of labor in recording cash transactions.
Liquidity management in a cash book helps a company to determine the amount of cash that the company has at any given time, either at the end of a day or a week. But, in every business a number of petty small payment like that for postage, carriage, stationery, entertainment, cartage, conveyance etc. In general, departments are strongly encouraged to use stanford purchasing cards or to request reimbursement through. Of the two bank reconciliation formats used by a business entity, the more widely used form reconciles both the bank balance and the book balance to a correct cash balance true when preparing a bank reconciliation for the purpose of arriving at a correct cash balance, nsf checks are subtracted from the balance per books. The ending balance of your version of the cash records is known as the book balance, while the banks version is called the bank balance. Petty cash works on the imprest system, in which there is an initial amount of money put into an account, which is drawn upon for a specific purpose in this case, petty cash.
There are two primary types of entries in the petty cash book, which are a debit to record cash received. One way to control cash is for an organization to require that all payments be made by check. When a trader keeps a bank account it becomes necessary to record the. In this book, separate columns are provided for usual head of expenditure. Every time you make a purchase, make a note in the book that includes date, amount your spend and the nature of purchase. Controllimitkeep track of petty cash expenditure the cash remaining and the vouchers received should equal the imprest can help to reduce fraud or other suitable advantage.
Preparing a reconciliation since it is really important to make sure that the cash account and the bank account balances match, a company prepares bank reconciliations on a monthly basis. The petty cash book is a recordation of petty cash expenditures, sorted by date. How to prepare petty cash bookpetty cash book in hindi. Rather than keeping cash acoount and bank account apart from each other, double column cash book enables us to keep these two accounts side by side. All the receipts in cash are recorded on the left side of the cash book entries. Simple steps to create dynamic petty cash book with ms excel. It is extremely common for there to be differences between the two balances, which. This is why the cash balance per bank and cash balance per books seldom agree. Petty cash accounting procedures reconciliation uses. Petty cash accounting involves establishing a petty cash policy, setting up a petty cash log, creating journal entries, and reconciling the petty cash account.
For this purpose, a petty cashier is appointed by the chief cashier. Petty cash book is maintained to record small expenses such as postage. Always the voucher would show the amount, purpose, recipient, general ledger account number and date relating to the expenses. Columnar petty cash book and its preparation process. Read this article to learn about the following types of cash book and its preparation, i. The petty cash book is a book of vouchers which are made each time an expense is made from petty cash money. A petty cash book takes in relevant details concerning purchases. Petty cash book the cash book as seen above is used for recording all major payments. In almost all businesses, it is found necessary to keep small sums of ready money with thecashier or petty cashier for the purpose of meeting small expenses such as postage, telegrams, stationary and office sundries etc. Meaning of petty cash book, its importance and advantages. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books. Tips keep the petty cash book and box or tin in a safe place, such as the accountants or managers office or cubicle. Petty cash book meaning, cash book vs petty cash book.
A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. The statement of cash flows enables users of the financial statements to determine how well a companys income generates cash and to predict the potential of a. Petty cash book format example definition explanation. A petty cashier makes a detailed analysis of petty payments and records under suitable heads, i. The cash book is a chronological record of the receipts and payments transactions for a business.
Importance and methods of preparation of trial bal. In most cases, the petty cash book is an actual ledger book. Petty cash vouchers are also referred to as petty cash receipts and can be purchased from office supply stores the petty cash voucher should provide space for the following. Start your book by recording each and every expense and the purpose for which the fund was utilized. Petty cash accounts are managed through a series of journal entries. For this purpose, a cheque is given to the petty cashier for a definite sum of money by the company. The credit recorded in the journal to reimburse the petty cash fund is to. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty cashier is a person, who maintains the petty cash book. Petty cash book maintains records of all petty payments systematically. A doubletwo column cash book to record cash as well as bank transactions.
Do not leave it in a common area, such as the lunchroom or meeting area. There are the two methods of preparing petty cash book. Accounting can be done manually or made easier with bookkeeping software and employee expense. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. These are expenses which are incurred day after day. For this purpose, he is given a small amount and a separate book to. This book records all those expenses which are small in amount and which are incurred on regular basis. 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. A 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. Thus, the book is part of a manual recordkeeping system. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly. Petty cash book definition, types, format, examples imprest and. 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.
Define the purpose and use of a petty cash fund, and prepare. From the initiation of journal, the ledger account is prepared, with the help of. What is a cash book definition, explanation and types. A petty cash book to record small day to day cash expenditures. The sum of money so kept in hand generally termed as. The statement of cash flows is a financial statement listing the cash inflows and cash outflows for the business for a period of time.
Cash book contains cash transactions passing into and out of a business. 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. Cash book explanations show your love for us by sharing our contents. One is used to record cash transactions, the second is used to record bank transactions and third is used to record discount received and paid. Objectives of trial balance concept and meaning of trial balance preparation of bank reconciliation. 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. Keep a book of petty cash to record the purchases you make with your petty cash fund. Cash flow represents the cash receipts and cash disbursements as a result of business activity.
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