Meaning Of Petty Cash Book And Advantages Of Keeping Petty Cash Book

Business Studies

Topic: Petty Cash Book

Table Of Contents

  • Meaning Of Petty Cash Book
  • Items Found In Petty Cash Book
  • Advantages Of Keeping Petty Cash Book

Meaning Of Petty Cash Book

Petty cash book is a book of account where minor expenses that cannot be conveniently entered into the cash book are recorded. Firms usually employ a junior staff proved to be faithful and of high integrity to do this work. The person who keeps the petty cash book is called the Petty Cashier.

Petty Expenses

The type of expenses usually recorded in the petty cash book include: Stationary, Office Tea, Cleaner’s wages, Postages stamps, Local running expense etc. These are minor and frequently occuring expenses. If these expenses are left for the main cashbook, it will be filled with these expenses that it would look awkward and cumbersome to keep; hence the introduction of petty cash book. The amount set aside for running these minor expenses is known as Float.

Imprest System

Imprest system is the most popular way of keeping the petty cash book. By this system a specified amount known as float is left with the petty cashier for petty expenses. At the end of the period, let say, a month, an amount equal to the amount he has spent is given back to the cashier to restore his cash at hand to the original amount held. For example, the amount held by the cashier is N500.00 out of which he spent N400.00 during the period. It means N400.00 would be given back to him so as to restore the cash he has at hand to the original amount that is N500.00. The original amount given to the petty cashier from which he makes expenses is known as “Imprest” or “Float”.

The source for the petty cash book is the Petty Cash Voucher. A voucher is usually signed by the person who receives the money from the petty cashier for a specific purpose, let say for the purchase of postage stamps or stationery. At times, superior officers such as heads of departments do authorize the payment. These vouchers are evidence that such money has been spent.

To check the integrity of the petty cashier, the main cashier should regularly check the petty cashier by demanding that he presents the cash vouchers covering the expenses he has made. He should also check that the physical cash agrees with the balance as shown by the petty cash book.

Advantages Of Keeping Petty Cash Book

The following are the advantages of keeping the petty cash book:

1. Keeping a petty cash book prevents clustering of the cash book with minor expenses.

2. It helps the senior accounts officer or chief cashier to concentrate on more important work by leaving the keeping of the petty cash to the petty cashier.

3. The imprest system check extravagant spending by the company. This is done by keeping a watch on the amount given to the petty cashier to restore the float.

4. It makes for effective record keeping of petty expenses, which could have otherwise been forgotten.

5. It gives clue to the extent the company spends on each of the items such as transport, carriage, postage stamps etc.

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