Home / Cash Book

2002 Views

Estimated reading time : 99 Minutes

Petty Cash Book and Imprest System of Petty Cash Book (Problem and Solution)

Arjun EP

Published on: October 15, 2020

(A) What is petty a cash book?

Petty cash means a small amount of cash.

The cash book for recording small payment is known as petty cash book.

All the business firms usually spend a small amount of money for postage, magazines, refreshment, stationery, bus fare, carriage, cleaning etc.

These are regular expenses and need immediate payments.

It is impracticable to pay these expenses through cheque.

These expenses are to be paid in cash.

If these small expenses are recorded in the cash book, it will be overburdened.

To avoid such difficulties, a petty cashier is appointed for making and recording these expenses.

The cashier who handles the petty expenses and petty cash book is known as petty cashier.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

(B) Imprest system of petty cash book

Imprest means advance. Under imprest system, advance money is given to petty cashier.

Generally, petty cashier takes money at the beginning period.

He spends small expenses form this money.

Expenses vouchers are checked by senior accountant at the end of period.

After checking the vouchers, senior accountant gives actual spent money to petty cashier.

Suppose on 1^st January petty cash fund is created by $/₹/Rs 1,000.

Petty cashier has spent Rs 930 till last January.

Now, he has Rs (1,000 ̶ 930) Rs 70.

On 1^st February Rs 930 is given to petty cashier.

Now he has same amount Rs 1,000 for current month.

This process goes on for the next month.

Keep in Mind (KIM)

Generally, petty cash book is closed weekly or monthly.

If amount becomes less within time period, junior accountant takes more money from senior accountant.

#######

Click on link for YouTube videos topic wise :
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Click on link for YouTube videos chapter wise:
Financial Accounting and Analysis (All videos)	http://tiny.cc/jlersz
Accounting Process	http://tiny.cc/mlersz
Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz

#######

(C) Types of petty cash book

There are two types of petty cash book; simple petty cash book and analytical petty cash book,

(i) Simple petty cash book

It is similar to simple cash book.

Cash received by petty cashier is recorded on debit side and petty cash payment on credit side.

The date and particulars of every transaction will be written in the same date and particular column.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 5A

Following extracted transactions related to petty cash book are given below:

Feb 1: Petty cash in hand Rs 150.

Feb 1: Cash received Rs 350

Feb 2: Postage stamps purchased Rs 50.

Feb 2: Stationery purchased Rs 40

Feb 3: Bus fare paid Rs 60.

Feb 4: Paid for refreshment Rs 80.

Feb 7: Electricity bill paid Rs 150.

Required: Simple petty cash book with balance

[Answer: Balance = 120]

SOLUTION:

Simple Petty Cash Book

Amount Received	CBF	Date	Particulars	V No.	Amount
150		Feb 1	To Balance c/d		−
350		Feb 1	To Cash account (received)		−
		Feb 2	By Postage purchased		50
		Feb 3	By Stationery purchased		40
		Feb 4	By Bus fare paid		60
		Feb 5	By Refreshment expenses paid		80
		Feb 6	By Electricity bill paid		150
		Feb 7	By Balance c/d		120¹
500			Total		500
120¹		Feb 8	To Balance b/d

(ii) Analytical petty cash book

Under this system, analytical or columnar forms are prepared for various expenses.

The credit side of analytical petty cash book contains number of columns for different heads of expenditures.

It also includes column for total amount.

The debit side of cash book contains only one column for the cash received.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 5B

Max Suppliers (P) Ltd established petty cash fund under responsibility of junior accountant Mr Amar.

Other information for the expenses is given below:

Date	Particulars	Amount
January 1	Received for petty cash flow	1,200
2	Paid for rickshaw	30
2	Paid for taxi fare	150
3	Paid for postage	30
3	Paid wages to casual labour	250
4	Paid for stationery	80
4	Paid for bus fare	140
5	Paid for repairs	130
5	Paid to LB Thapa (purchases of previous week)	150
6	Register purchased	60
6	Paid for Coke and Fanta	70
6	Paid for refreshment	50

Required: Analytical petty cash book

[Answer: Balance = 60

SOLUTION:

Dr Analytical Petty Cash Book Cr

Receipt	Date	Particulars	PCV	Total	Analysis Columns
	Jan.				Postage	Fare	Wage	Statio- nery	Refresh -ment	Repair	Ledger
1,200	1	To Balance b/d
	2	By Rickshaw fare	1	30		30
	2	By Taxi fare	2	150		150
	2	By Postage	3	30	30
	2	By Wages	4	250			250
	4	By Stationery	5	80				80
	4	By Bus fare	6	140		140
	5	By Repairs	7	130						130
	5	By LB Thapa	8	150							150
	5	By Register	9	60				60
	6	By Coke and Fanta	10	70					70
	6	By Refreshment	11	50					50
	6	By Balance c/d (b/f)		60¹
1,200		Total		1,200	30	320	250	140	120	130	150
60¹	7	To Balance b/d
					GL 16	GL 17	GL 18	GL 19	GL 20	GL 21	GL 22