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What is Petty Cash?

According to a Wikipedia page – Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque. To keep track of Petty Cash inflow and outflow – Corporates and Individuals usually maintain, what is known as a ‘Petty Cash Book’. In this article, find the petty cash format.

A Petty Cash Book can have multiple formats – however, the basics of all remain the same. A sample petty cash format could look like:

Date Purchase/Receipt Amount Balance
4/01/xx Opening balance $250.00 $250.00
4/05/xx Kitchen supplies -52.80 197.20
4/08/xx Birthday cake -24.15 173.05
4/11/xx Pizza lunch -81.62 91.43
4/14/xx Taxi fare -25.00 66.43
4/23/xx Kitchen supplies -42.00  24.43

Another petty cash format could look like:

Date Description  Meals Supplies Travel
4/05/xx Kitchen supplies Rs. 3000
4/08/xx Birthday cake Rs. 500
4/11/xx Pizza lunch Rs. 300
4/14/xx Taxi fare Rs. 230
4/23/xx Kitchen supplies Rs. 2500
Total Rs. 800 Rs. 5500 Rs. 230

What happens if Petty Cash nears zero?

When the amount of petty cash on hand declines to near zero, as is caused by withdrawals for various expenditures, the petty cash clerk then obtains additional cash from the cashier, and records this cash influx as a new debit. The petty cash clerk also turns in a copy of his or her petty cash book to the general ledger accountant or cashier, who creates a journal entry to record how the cash in the petty cash drawer was used.

Petty Cash Book

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; usually, petty expenses are large in quantity but insignificant in value. To record such expenses, a different book known as a petty cash book is maintained. It may be maintained by ordinary or by the imprest system.

Types of Petty Cash Books

  1. Simple
  2. Analytical

Sample format for Simple Cash Book

 Amount Received  C.B Folio  Date  Particulars  Voucher No.  Amount Paid

Sample format for Simple Cash Book

Considered as the most beneficial method of recording petty cash payments. In the analytical version, a separate column is used for each commonly occurring item of expenditure such as stamps, postage & handling, stationery, wages etc.

A column for “sundries” is usually added for miscellaneous payments. When a petty expense is recorded on the right hand side of the book, same amount is also recorded in the proper expense column.

Receipts Date Voucher No. Particulars Total Payment Transport Postage Stationery Cartridge Sundries

Advantages of maintaining a Petty Cash Book

Reduction in numbers of transactions: Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash.

Reduction of errors: As head cashier check the accounts of previous month and gives advance for the coming month, does, errors if any are reduced.

Savings of time and labor: As the petty expenses are recorded by petty cashier at any time so that the chances of misuse are minimized.

Control on petty expenses: While checking the total of such expenses, the head cashier can put objections on undesirable expenses, thus, expenses are controlled.

Facility in posting: Since only the total of various small expenses are recorded in cash book, hence, direct ledger posting becomes easy.

Saving of space: Only the total of all small expenses are recorded in cash book and also in ledger account, thus, lot of space is saved.

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