A s the petty cashier has to produce to the chief cashier the petty cash book for inspection, it acts as a healthy check on the petty cashier. Petty cash is a small amount of cash that a business has on. The establishment of a petty cash system begins by making out a check to cash, cashing it, and placing the cash in a petty cash box. Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established during an accounting period petty cash is used to pay cash expenses which are supported by petty cash vouchers. Columnar petty cash book and its preparation process. Keep this log readily available so you can fill it in on a regular basis taking the information off the petty cash vouchers. Add a petty cash account to your chart of accounts if you do not already have one. Balancing the petty cash in the box or drawer is the first step in auditing. Let us learn about the petty cash book and the various systems of maintaining the said account. Examples of these payments are office supplies, cards, flowers, and so forth. Understand how the imprest system works in the petty cash book. Petty cash is a small amount of cash that is kept on the company premises to pay for minor cash needs.
It is easy to set up and will save you from writing a lot of small checks or using your personal funds. Your petty cash book protocols should include a system for verifying that funds have been added and subtracted accurately and honestly. Since petty cash register does not form part of the double entry system, payments made through petty cash are subsequently posted into the cash ledger and the general ledger. Petty cash book explanation, format, example, ordinary and imprest. Under this method, the amount essential to assemble out various petty operating costs is estimated and given to the petty cashier at the beginning of. 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.
Petty cash book aoc this article covers the terminologies in the petty cash book system of accounting, the definition of terms and the analysis of payments. The cash allocated for petty expenditures for a specific period is entered on the credit side of general cash book and on the debit side of. The total of all petty cash plus the receipts for items petty cash was used to pay for should equal the total amount of petty cash held for use. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. This system will only allow the petty cash amount within the float amount. Petty cash book explanation, format, example, ordinary. How to set up and maintain a petty cash account basic. Enter the following transaction in the following columns. The imprest system is an accounting system designed to track and document how cash is being spent. A petty cash book is just another kind of cash book that records petty cash transactions, i. A petty cash account is simply money kept on hand to pay for minor cash items such as stamps, office supplies, tips, parking tolls, etc. Second, a check is written for this amount, and the cash is given to the cashier in charge of the petty cash fund.
The balance of the petty cash book will be shown on the asset side of balance sheet as. By watching this video you will understand how to record all the entries in the petty cash voucherreceipt book. A business uses a petty cash account for tracking physical cash used to make small payments. 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. 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. Maintaining a cash book under the stated system is called an imprest petty cash book. The most general imprest system is the petty cash system. 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. Payments in cash of small amounts like traveling expenses, postage, carriage etc. A petty cash is a cash book used to enter all small or petty expenses obtained. The petty cash book is a formal summarization of petty cash expenditures, sorted by date.
Overall, petty cash is a largely outdated and inefficient system. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the daytoday normal. Petty cash is often used for meeting refreshments, reimbursing an employee for office supplies she purchased, or other miscellaneous expenses that require payments in cash or coin. Petty cash, also known as imprest cash, is a fund established for making small payments that are impractical to pay by check. Managing a petty cash account for your small business. Enter the date and cash value for the opening balance to get a summary with updated cash balance in real time.
A separate column is allotted for each type of expenditure. The imprest petty cash system is a method of accounting for petty cash expenses. An imprest system is used to run and manage a petty cash fund. While convenient for small purchases, it is not a realistic solution for larger expenses. Record and monitor all cash on hand transactions with this petty cash book template. Without a petty cash system, using small cash amounts periodically can. Petty cash register shows the following payments in the month of january. There might be a petty cash drawer or box in each department for. By keeping track of all petty cash transactions no matter how petty you have records to back up deductions for those small business expenses. Your petty cash book format should be similar to the following entry. 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. A petty cashier makes a detailed analysis of petty payments and records under suitable heads, i. Suppose for example a business maintains a petty cash fund of 300.
Start a petty cash fund by writing a check drawn on your company to petty cash. 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. The main advantages of imprest system of petty cash are as follows. 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. Subscribe to our youtube channel so as not to miss a tutorial video. Examples include postage due, reimbursement to employees for small purchases of office supplies, and numerous similar items.
Petty cash book is a formal summarization of petty cash expenditures, sorted by date. Impressed petty cash system, detailed accounting example duration. This template is easy to use and an effective way to get control. Thus, the book is part of a manual recordkeeping system. Petty cash is stored in a petty cash drawer or box near where it is most needed. Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. First, management has to estimate how many small purchases it will make and much money it will need for these purchases.
Petty cash book format example definition explanation. These petty cash expenses are recorded in the petty cash book. Manage your business expenses anytime, anywhere with debitoor invoicing software. In most cases, the petty cash book is an actual ledger book, rather than a computer record. The most common example of an imprest system is the petty cash system. Definition of petty cash petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. In the petty cash book not part of the double entry bookkeeping system, the cash received to replenish the fund of 65 is recorded and the imprest fund is now back to its original cash amount of 100. This quiz and worksheet gauge your knowledge of establishing and replenishing a petty cash fund, as well as what petty cash funds are used for. The example shows how we record them in a columnar petty cash book.
Imprest system of petty cash fund the world impress means advance amount which is personal to certain person to make petty expenses. This method is a structure of financial accounting system. Petty cash book maintains records of all petty payments systematically. The amount of petty cash also known as the petty cash fund varies by company or organization. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and postage. It is a system of petty cash book where a person is given a fixed amount in the beginning of the period, the petty cashier submits the account of. What is the importance of petty cash in a business. A petty cash book is just another kind of cash book that records petty cash transactions. The cash can be kept in a small safe or locked file cabinet, perhaps in an manila envelope. There are two primary types of entries in the petty cash book, which are a debit to record cash received. For smallscale business, simple petty cash book is sufficient but on a medium or large scale business number of petty expenses increases hence it is desirable to have the separate record for each type of petty expenses. The bigger the company, the harder it is to track outgoing petty cash, change and receipts. Petty cashier is a person, who maintains the petty cash book. Petty cash book is maintained to record small expenses such as postage, stationery, telegram.
Petty cash, also known as imprest cash, is a fund established for making small. Under this system the petty cashier at first receives from the chief cashier a fixed sum of. Prepare a blank petty cash log utilizing a small book or you can use this free pdf template. Petty cash replenishment refers to the process of restoring the cash balance in the petty cash fund back to its original imprest amount. How the imprest system of petty cash book works your. 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. Documenting transactions is the way a business documents business expenses for tax purposes. The petty cashier of john and james company paid cash for the following expenditures during march 2018. The firm may adopt imprest system of maintaining petty cash. The imprest system is used for petty cash book maintenance. Petty cash book 2019, imprest system of petty cash. If at any time the total of the remaining cash held plus the petty cash vouchers is not equal to the.
The establishment of a petty cash system begins by making out a check to cash. Petty cash is the small cash reserves that businesses keep on the. An imprest system of petty cash means that the general ledger account petty cash will remain dormant at a constant amount. 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. Petty cash book definition, types, format, examples. In this book, separate columns are provided for usual head of expenditure. Scroll down to step 2 below for a completed example. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. At the end of an accounting period a count of the petty cash shows that the fund contains cash of 240 and expense vouchers for supplies of 40.
The head cashier before funding again examines the previous expenses. 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. At the end of the period a petty cash reconciliation is carried out. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. A cash book acts like both a journal and a ledger for cash transactions. Imprest system of petty cash is a system where the petty cashier is given a lump sum in cash often called a float keeping in view the possible needs of the business to meet its petty expenses for a stated period, e. Under the imprest system the petty cashier maintains a fixed float balance. This makes the entire petty cash system susceptible to abuse or fraud. If a business uses the imprest system, it will create an imprest. Accounting for petty cash explanation, related controls. The petty cash book is maintained by separate cashier known as petty cashier. The most important part of a petty cash system is the documentation of each transaction. Examples include postage due, reimbursement to employees for small. For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs.
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