Petty Money Book: Payments in money of small amounts like taking a trip costs, postage, carriage etc. are petty cash expenditures. These minor cash expenditures are recorded in the minor cash book. The petty cash book is maintained by separate cashier referred to as minor cashier. The firm might embrace Imprest System of preserving petty money. The minor cashier is offered a specific sum of money at the start of the fixed duration (e.g. a month/fortnight) which is called float. The quantity of float is so fixed that it may be appropriate to meet petty costs of the proposed period. The balance in the minor cash book reveals cash lying with the minor cashier.
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Petty Cash Book
In a company home a number of small payments, such as for telegrams, taxi fare, cartage, etc., need to be made. If all these payments are taped in the cash book, it will become unnecessarily heavy. The primary cashier will be overloaded with work. It is typical for frms to designate a person as ‘Petty Cashier’ and to turn over the job of making little payments state below Rs 25, to him. Of course he will be repaid for the payments made. Later, on an analysis, the respective account may be debited.
The benefits of the imprest system are as follows:
Petty Money Book may be dealt with either as a part of the double entry system or merely as a memoranda book. If the previous course is adopted, each payment to petty cashier is revealed on the credit side of the main Cash Book which is considered to have actually been balanced by a debit entry in the minor money book. The 2 entries are folioed against each other finishing the double entry element. Payments tape-recorded in the Petty Money Book are directly posted to the different nominal accounts. Naturally, entries for costs are made only with the periodical overalls of expenditures under different heads. If the latter course is adopted, for quantities paid to petty cashier, minor money account in the ledger is debited besides entering the quantities (paid to petty cashier) on the credit side of the main money book. Occasionally, different small accounts are debited and the minor money account is credited in ledger for expenses tape-recorded in Petty Cash Book
Imprest System of Petty Cash
It is convenient to turn over a certain sum of money to the petty cashier in the beginning of a duration and to reimburse him for payments made at the end of the duration. Such a system is understood as the imprest system of petty-cash.
The system is extremely useful specially if an analytical Petty Money Book is utilized. The book has one column to tape receipt of money (which is just from the primary cashier) and other columns to tape payments of numerous types.
- ( i) The amount fixed for petty money needs to suffice for the most likely small payments for a relatively brief duration, state for a week or a fortnight.
- ( ii) The compensation should be made just when petty cashier prepares a declaration revealing total payments supported by coupons, i.e., documentary evidence and ought to be limited to the quantity of actual disbursements.
- ( iii) The vouchers must be left in order.
- ( iv) No payment should be made without correct authorization. Also, payments above a certain defined limit should be made only by the main cashier.
- ( v) The petty cashier should not be enabled to receive any money except for compensation.
In the petty money book the extreme left-hand column records receipts of cash. The cash column towards the right hand reveals total payments for various functions; a column is normally provided for sundries to tape infrequent payments. The sundries column is evaluated. At the end of the week or the fortnight the petty cash book is balanced. The technique of balancing is the same as for the simple money book.
Suggested
- Accumulated Liabilities
- Limitations of Accounting
- Depreciation Guidance Note
- Capital Structure
- Book Keeping
- Interest on Capital
- Accounting Price Quotes
- Double Entry System
- Book Keeping
