Petty Cash Book and Imprest System of Petty Cash Book

 

Petty 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 = 

 

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.

  

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TYPES OF PETTY CASH BOOK

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

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 = 

PROBLEM: 11

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
150 350		Feb 1 Feb 1 Feb 2 Feb 3 Feb 4 Feb 5 Feb 6 Feb 7	To Balance c/d To Cash account (received) By Postage purchased By Stationery purchased By Bus fare paid By Refreshment expenses paid By Electricity bill paid By Balance c/d		− − 50 40 60 80 150 1201
500			Total		500
1201		Feb 8	To Balance b/d

 

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.

 

PROBLEM: 12

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

Required: Analytical petty cash book

[Answer: Balance = 60

SOLUTION:

    Dr                                                              Analytical Petty Cash Book                              Cr

GL 16 = general ledger number 16

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PROBLEMS  AND  ANSWERS

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

 

AP: 3

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

      March 1:        Petty cashier starts with opening balance of Rs 500.

      March 2:        Postage stamps purchased Rs 50.

      March 2:        Stationery purchased Rs 140

      March 3:        Bus fare paid Rs 50.

      March 4:        Paid for refreshment Rs 60.

      March 7:        Paid to Ganesh, (a creditor) for bill Rs 75.

Required: Analytical petty cash book with suitable heading and balance

[Answer: Balance = 125]

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