Petty cash book

  • When the business grows and the number of transactions increases, it becomes difficult to record all these transactions in a single book.
  • To make the task easier, these small and recurring expenses are recorded in a separate cash book called ‘Petty Cash Book’.
  • The sum of money to make immediate payments for miscellaneous expenses is known as Petty Cash.
  • Advantages of petty cash book are burden of main cash book keeper is reduced, helps in preparation of ledger accounts, etc.
  • Cash is maintained on the basis of ordinary system or imprest system. In ordinary system petty cashier is given a certain amount of cash to meet the petty expenses. Amount of advance and the period of advance may not be fixed. When cashier has nearly spent the whole amount, he submits the account of expense along with the surplus amount.
  • In imprest system a fixed amount is estimated to meet the expected petty expenses of a particular period. Imprest means ‘advance made to a certain person’.
  • Head cashier gives a definite sum to the petty cashier at the beginning of a particular period, known as imprest amount.
  • Advantages of imprest system of Petty Cash are control over mistakes, control over petty expenses, control over fraud and control over cash.
  • Petty cash book can be simple or analytical.
  • A simple petty cash book is one in which there is one common column for date and particulars, for both the receipts and payments.
  • Analytical petty cash book is a book in which there is only one amount column on the debit side and a number of columns on the credit side for different heads of expenses.
  • There are differences between Simple & Analytical petty cash book.

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  • Q1

    What is C.B.F. N?

    Marks:1
    Answer:

    C.B.F.N stands for Cash Book Folio Number. It is the second column in the analytical petty cash book and shows the page number of the cash book wherein the cash paid by the cashier is recorded.

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  • Q2

    Define the term petty cash.

    Marks:1
    Answer:

    It is the sum of money to make immediate payments for miscellaneous expenses.

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  • Q3

    What do you understand by ordinary system of petty cash?

    Marks:1
    Answer:

    Under ordinary system, the petty cashier is given a certain amount of cash in advance to meet the petty expenses. However, the amount of advance may not be fixed.

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  • Q4

    Abhishek, the Petty Cashier of Mahima Enterprises has an imprest of INR 8,000 out of which he pays for petty expenses. He submits the details of payments every 15 days which is reimbursed to him. He submitted the details for the 15 days that ended on May 15, 2016 amounting to INR 7,600. He has with him unpaid expense vouchers amounting to INR 3,200. How much amount should be paid to him?

    Marks:2
    Answer:

    Head Cashier of Mahima Enterprises reimbursed only INR 7,600, i.e., the amount already paid by the Petty Cashier to make the total imprest INR 8,000 at the beginning of the new period. Unpaid expenses of INR 3,200 will be paid by Petty Cashier out of the fresh imprest of the next month.

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  • Q5

    Give one purpose of Petty Cash Book.

    Marks:1
    Answer:

    Save the time and effort of Chief Cashier.

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