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| Corporate Practice bd |
Petty Cash Book - What Is It, Format, Types & Advantages
A petty cash book is a small ledger used to record small and incidental cash expenses of a business. Here's a brief explanation of what it is and its advantages:
Petty Cash Book
Definition: A petty cash book is a type of subsidiary ledger that tracks small, routine expenses such as office supplies, postage, minor repairs, and other miscellaneous expenditures that do not justify the complexity of writing a check or making a bank transfer each time.
Advantages:
Convenience: It provides a convenient way to handle small cash transactions without needing to process each payment through the regular accounting system.
Expense Control:
Helps in monitoring and controlling small expenditures, thereby preventing misuse or overspending of petty cash funds.
Efficiency:
Saves time and effort by reducing administrative burden associated with processing small payments.
Flexibility:
Allows quick access to cash for urgent or small purchases that require immediate payment.
Format of Petty Cash Book
A typical petty cash book format includes:
Date: Date of the transaction.
Details: Description of the expense (e.g., office supplies, postage).
Amount: Amount disbursed for each expense.
Total: Running total of the petty cash balance after each transaction.
Receipts: Attached receipts or vouchers for each expenditure to support documentation.
Example:
Let's say a company maintains a petty cash fund of $200. The petty cash book might record transactions like this:
|
Date |
Details |
Amount ($) |
Total ($) |
|
2024-07-01 |
Office Supplies |
50 |
150 |
|
2024-07-05 |
Postage |
30 |
120 |
|
2024-07-10 |
Coffee for Office |
20 |
100 |
|
2024-07-15 |
Petty Cash Replenishment |
100 |
200 |
In this example, the petty cash book tracks various small expenses, with the total amount disbursed reducing the available petty cash balance. Periodically, the petty cash fund is replenished to its original amount (in this case, $200) by reimbursing from the main cash account.
Petty cash books are particularly useful in maintaining financial discipline and accountability for small expenditures within an organization.