Meaning of a Petty Cash Book
Firms Record small, frequent cash payments in the Petty Cash Book, a book of original entry designed for minor business expenses. Using this book prevents the Main Cash Book from becoming cluttered with tiny transactions like postage, stationery, transport fares, refreshments, and minor repairs.
Definition:
A petty cash book is a book of original entry used to record small, frequent cash payments made by a business.
The petty cash book helps to reduce the workload of the main cashier and ensures proper control over small cash expenses.
Purpose of a Petty Cash Book
The petty cash book is maintained in order to:
- Record small cash expenses accurately
- Save time by avoiding frequent entries in the main cash book
- Improve internal control over minor expenditures
- Prevent misuse or misappropriation of small amounts of cash
- Provide detailed information for expense analysis
Who prepares a cashbook in a business organization?
A petty cashbook is prepared and maintained by a Petty Cashier.
A Petty Cashier is the person in an organization responsible for managing a small fund of cash (known as Petty Cash) used to pay for minor, everyday office expenses.
Think of them as the gatekeeper for the “small change” that keeps an office running without needing a formal check or a complex bank transfer for every tiny purchase.
Key Responsibilities
- Disbursement: Handing out cash for small items like office supplies (pens, folders), postage stamps, taxi fares, or emergency coffee for a meeting.
- Documentation: Collecting receipts or “petty cash vouchers” for every cent spent. This is crucial for keeping the books balanced.
- Record Keeping: Maintaining the Petty Cash Book. They record what comes in (the float) and what goes out (expenses).
- Reconciliation: Reconcile the fund periodically by verifying that the remaining cash plus the total of all receipts equals the original float.
Skills and Competencies of a Petty Cashier
- Basic Accounting Skills
Ability to record petty cash transactions accurately in the petty cash book and understand simple accounting principles. - Numerical Accuracy
Competence in handling figures correctly to avoid errors in calculations and cash balances. - Record-Keeping Skills
Ability to maintain proper records, vouchers, receipts, and supporting documents for all petty cash payments. - Integrity and Honesty
High level of trustworthiness since the petty cashier handles cash and is responsible for safeguarding it. - Attention to Detail
Ability to notice small errors, missing vouchers, or incorrect entries in the petty cash book. - Organizational Skills
Ability to organize petty cash vouchers, receipts, and records systematically for easy reference and audit. - Time Management Skills
Ability to process petty cash payments and record transactions promptly without delays. - Communication Skills
Ability to explain petty cash procedures and communicate clearly with staff requesting petty cash. - Knowledge of Imprest System
Understanding how the imprest system works, including reimbursement and balancing of petty cash. - Confidentiality
Ability to handle financial information discreetly and responsibly.
Components Of A Petty Cashbook
1. The Receipts Column (Debit Side)
This is located on the far left. It records any money received from the Chief Cashier to start or “top up” the fund.
2. Date
Date: Exactly when the transaction happened.
3. Particulars /details
A brief description of the transaction (e.g., “Postage stamps,” “Cleaning supplies,” or “Cash from Main Cashier”).
4 . Voucher Number (V.N.)
Every time a petty cashier hands out money, they should receive a signed Petty Cash Voucher. Record the voucher number here to establish a clear audit trail.
5. Total Payments Column (Credit Side)
This is the total amount column for outflows. Record every cent leaving the cash box in this column immediately
6. Analysis Columns
Instead of just having one big list, you spread the expenses into separate columns based on their type. This makes it easy to see where the money is going at the end of the month. Common columns include:
- Postage & Stationery: Stamps, envelopes, pens.
- Traveling/Conveyance: Taxi fares, bus tickets, parking.
- Office expenses: Soap, small repairs, tea/coffee.
- Ledger Account: For payments made to a specific person or creditor that don’t fit a general category.
7. The Ledger
We record payments to specific accounts in the Ledger Folio column, which serves as a reference page number.
When using petty cash to pay a creditor, enter the amount directly into the Personal Ledger column.
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