Petty Cash Book

When running an organization, management faces many challenges but many of the challenges should be solved regularly by managing the finance of the company. Petty cash and maintaining the petty cash is one of the major challenges that organizations may face on daily basis.

In this article, we will discuss all “Petty Cash Books.” If you want to know further about it then you are at the right place.

Petty Cash —- Overview

Petty cash is part of the record keeping of a company. In most companies, a petty cash book is a record book except for the computer record. It is completely distinct from the bookkeeping in which we record our company’s financial transactions in organizational accounts.

With regular bookkeeping, many companies also maintain a petty cash book to record little and daily expenses of an organization like food, office supplies, electricity, postages, travel, fuel, and other such expenses. The person who maintains the record of the petty cash book is known as the petty cash cashier.

What is the procedure for maintaining petty cash?

 Three procedures of petty cash in an organization that is mentioned below:

  • Open System

An open system is also known as the ordinary system. In this system, the petty cashier is provided a sum for expenses. The cashier submits the accounts with receipts for approval to the main cashier after spending the whole money in the account.

  • Fixed System

In this system of petty cash, the main cashier fixed the quantity of money for a specified time for a special period to petty cash. After spending the amount, the petty cash cashier will submit the account for money and he will be provided money for the next period.

  • Imprest System

This is one of the most commonly followed systems for maintaining petty cash. Under this system, the entire quantity of money for petty expenses for a particular time is calculated and provided the advance to the cashier.

After spending the received cash, the cashier will submit the detailed account at the end of the time and will get the advance for the next time.

How many categories of petty cash books are there?

Petty cash is categorized into two types, which are mentioned below:

  • Columnar Petty Cash Books

Many money columns record daily expenditures in this type of petty cash book. This type of petty cash book has two sides, one on the credit side and the other is the debit side. In the particular column, the particulars of cash, receipts, and expenses are mentioned while in the other column, the debit and credit dates are mentioned.

The money provided by the head cashier is mentioned in the debit money column. The credit side contains money columns according to per expenses. The total money column records the sum of all the columns.

  • Analytical Petty Cash Books

An analytical petty cash book is one of the most efficient ways to record petty cash payments. In this type of petty cash book, a separate column is given for each petty expense on the credit side. A petty expense is recorded in the given petty cash column.



What are the benefits of imprest petty cash books or systems?

Following are some of the major benefits of petty cash books or systems:

  • Reduce the need for labors

As compared to the traditional petty cash system, imprest petty cash does not need intensive labor. The entire task is easy to do in this type of petty cash book.

  • Greater control on the petty cash

In the imprest system, the petty cashier gets the entire control over the petty cash expense. He will submit a statement of expenses for approval at the end of the time set by the major cashier. The major cashier can easily analyze the expenses and can easily identify the fraud.

  • Easy verification

The imprest system enables the head cashier to verify all the expenses easily and carefully. Additionally, it enables the major cashier to identify and stop fraud.

  • Fix fund

In this system, the head cashier always knows the amount of the given petty cash. This enables the head cashier to check and close the account rapidly.

What are the disadvantages of petty cash books?

  • Errors in accounting are common due to the lack of documentation
  • If the amount of expense is not fixed then there are high chances of the overspending
  • In this method, the threat of theft is increased
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