Cash and Petty Cash Book

Meaning of Cash Book

Cash book is one of the type of subsidiary book (Day Book) that records original entry of all cash receipts and payments including bank deposit and withdrawal.   There are various types of subsidiary books listed as follows:

1. Cash Book
2. Purchase Book
3. Sales Book
4. Purchase Return Book
5. Sales Return Book
6. Bills Receivable Book
7. Bills Payable Book
8. Journal Proper
   

A cash book has both debit and credit hence it acts as a ledger account. Cash book has different types and used based on organizational requirements. They are:

1. Single Column Cash Book: Under this type, only debit cash and credit cash columns are available.
   

2. Double Column Cash Book: Under this type, both debit (cash and bank) and credit (cash and bank ) columns are available.

3. Triple Column Cash Book : Under this type, both debit (cash and bank as well as discount) and credit (cash and Bank as well as discount) columns are available.

*Contra entry refers to the transactions involving both cash and bank and having net zero affect between them.

Concept of Petty Cash Book

Petty cash is a system that funds and tracks small purchases such as parking meter fees that aren't suitable for check or credit card payments. A petty cash book is a ledger kept with the petty cash fund to record amounts that are added to or subtracted from its balance. Petty cash should be part of an overall business accounting system that documents how your business moves funds between one account and another and how it spends its money.

Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel, newspapers, cleaning, pins, and causal labor etc. These small expenditures are usually paid using coins and currency notes rather than checks.

The person responsible for spending petty cash and recording it in a petty cash book is known as petty cashier.

The chief cashier (also known as head or main cashier) bears the heavy responsibility of maintaining company’s general cash book in which receipts and payments amounting to hundreds or even thousands of dollars are recorded by him every day. He, therefore, usually delegates the responsibility for handling small day to day cash transactions to a bookkeeper, receptionist or some other reliable staff member. 

Fig: Types of Cashiers

Like a general cash book, a petty cash book has a debit and a credit side. All receipts are recorded on the debit side and all payments are recorded on the credit side of petty cash book by the petty cashier.

Systems of Petty Cash Book

The cash allocated for petty expenditures for a specific period is entered on the credit side of general cash book and on the debit side of petty cash book.

The cash is given to the petty cashier either on ordinary system or imprest system which are briefly explained below:

1. Ordinary System: Under ordinary system, a lump sum amount of cash is given to the petty cashier. When the whole amount is spent, the petty cashier submits the details of petty expenditures recorded in the petty cash book to the head or chief cashier for review.

2. Imprest System: Under imprest system, a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists of a week or month. At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier.

Conditions of Petty Cash Book

Petty Cash Fund is the amount which is separately kept for small amount of expenses that will occur in the future by Chief Cashier to Petty Cashier.

In case of: 

1. Established: When the petty cash fund is kept for small amount of future expenses. Generally it is established by certain percentage or amount of total cash.

2. Reimbursed: When the petty cash fund becomes low, a journal entry is passed individually debiting all expenses and crediting petty cash fund for sum of disbursement made.

3. Disbursed: When all amount of petty cash fund becomes zero, a journal entry is passed entirely debiting petty cash expenses and crediting petty cash fund.  

Journal Entries related to Petty Cash Fund

Methods of Petty Cash Book

Basically there are two types of methods that helps to keep the transactions properly presented as bellows:

1. Simple Petty Cash Book: This types of petty cash book records all the small expenditures without separating the heads of expenditures like Transport, Food, etc.
   

2. Analytical Petty Cash Book: This types of petty cash book records all the small expenditures with separating the heads of expenditures like Transport, Food, etc.

Conclusion

Cash book is one of the type of subsidiary book (Day Book) that records original entry of all cash receipts and payments including bank deposit and withdrawal. A petty cash book is a ledger kept with the petty cash fund to record amounts that are added to or subtracted from its balance. Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel, newspapers, cleaning, pins, and causal labor etc. These small expenditures are usually paid using coins and currency notes rather than checks.The cash is given to the petty cashier either on ordinary system or imprest system. The lump sum amount of cash is given to the petty cashier under ordinary system whereas a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists of a week or month under imprest system. There are three conditions of petty cash book include establishment, reimbursement and disbursement. Basically there are two types of methods that helps to keep the transactions properly include simple petty cash book and analytical petty cash book.

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