Petty Cash Book: Meaning, Advantages, Format, and Classification [Notes with PDF]

In this article, we will learn in-depth about the petty cash book including its definition, necessity and advantages, format, classification, and much more.

What is a Petty Cash Book?

The English word “petty” means “small” or “tiny.” A petty cash book is a book that keeps track of small expenses. The petty cashier is the person who keeps the petty cash book.

The petty cash book is a cash book that records the sum of petty cash receipts from the chief cashier as well as the specifics of petty cash payments made by the petty cashier.

For example, a petty cash book records regular petty expenditures such as paper, ink, transportation, entertainment, stamp expenses, and so on.

So we can say that a petty cash book is a book in which a business organization’s or any other organization’s small expenses are recorded in chronological order at an early stage.

Necessity and Advantages of Petty Cash Book

There are numerous cash transactions in both large and small organizations in today’s competitive business world. These cash transactions must be properly recorded in the cash book by the Chief Cashier.

It is extremely difficult for one person to record all cash transactions in a single cash book. As a result, the petty cashier keeps track of petty expenses in a petty cash book and presents them to the chief cashier at a predetermined time.

The importance and necessity of a petty cash book for the efficient handling of cash transactions in large organizations are undeniable.

The following are the reasons why a petty cash book is necessary and beneficial

1.Reducing the workload of the Chief Cashier:

In the business, many petty transactions occur every day, and these petty expenses must be paid in cash or by check on a daily basis. By delegating such petty cash expenditures accounts to the small cashier, the chief cashier’s workload will be greatly reduced.

2. Reducing the volume of the cash book:

If the business organization records all the small expenses in the general cash book, the volume of the cash book will increase and it will be difficult to record.

Therefore, petty cash books are essential to reduce the volume of cash books.

3. Time and labor savings:

As a result of the retention of petty cash books, there is no need to keep a detailed account of petty expenditure in ordinary cash books.

This saves the cashier valuable time and labor.

4. Error reduction:

The chief cashier is busy with much more important work. There is a risk of making a mistake in keeping track of his petty expenses.

So recording petty expenses in a separate book reduces workload and reduces the risk of errors.

5. Assisting the work of account:

The sum of the petty cash books account is transferred as a ledger every month or after a certain period of time. So accounting is easier and time is reduced.

6. Individual representation of petty expenses:

Keeping petty cash books makes it easier for the organization to get a separate picture of the cost of each sector.

7. Verifying the fluctuation of petty expenses:

The preservation of this book results in a separate and overall reduction in various petty expenses.

8. Control petty expenditures:

Petty expenses are accounted for by an individual, making it easier to keep track of them because the chief cashier double-checks the expense accounts before making payments.

From the above discussion, we can say that the importance and advantages of keeping a petty cash book are numerous. Because if you can keep it clean, the chief cashier will be able to do his job properly. This book can also be used to gain overall control over petty spending.

Classification of Petty Cash

Petty cash book is two types:

1. Columnar Petty Cash Book

2. Imprest Petty Cash Book

1.Columnar Petty Cash Book

Columnar petty cash book is the primary book in which the money collected from the head cashier and the sum of expenditure for a certain period of time are recorded in chronological order of dates in separate money columns on both sides.

There are two sides to the columnar petty cash book. A debit side and a credit side. The particulars column is used to write the details of cash receipts and expenses, while another column is used to write the dates of all debit and credit transactions.

The amount of cash collected from the head cashier is written in the debit money column. The credit side of this book has a lot of money columns for recording expenses, and the expenses are recorded in chronological order of dates.

2. Imprest Petty Cash Book

The head cashier gives a fixed sum of money to the petty cashier in advance for meeting expenses for a specific time under the imprest system of petty cash book, and the petty cashier submits a statement of expenditures incurred to the head cashier at the end of the period.

It should be remembered that a petty cashier’s expenditures cannot surpass the amount of money he receives.

After properly verifying the expenses, the head cashier pays a sum equal to the amount spent by the petty cashier in advance to equalize the petty cashier’s prefixed fund. Imprest petty cash book is a type of cash book that is kept under the specified system.

Format of Petty Cash Book

The format of a petty cash book is as follows:

Petty Cash Book

Receipts ($)DateParticularsV.N.Payments ($)Analysis of Payments ($)
Jan-10Rail Fare3030
Jan-23Bus Fare4040
Jan-31Balance C/D45
45Feb-01Balance B/D

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