What is Petty Cash Book
In every business organisations, there is a number of transactions. Some transactions are in a big amount and some are very small amount. If an accountants wants to record all the transactions in the cash book that make the cash book unnecessarily bulky and uneasy.
In a imprest system, a cashier is provided a small amount to meet the petty expenses of a given period and is authorized to make such payments and to record them in a separate Cash Book. Petty Cash book system are also called as “Imprest System.” The person who is maintaining petty cash book is called as a “Petty Cashier.”
However, the Petty Cash Book may or may not be maintained on imprest system. Sometimes it may be maintained on Non-imprest system. Under imprest or non-imprest system the petty cashier submits the Petty Cash Book to the Head Cashier to examines the Petty Cash Book. Under the imprest system the head cashier reimbursed the amount spent by the Petty Cashier but under Non-imprest system the head cashier may handover the cash to the petty cashier equal to/more than/less than the amount spent. Usually, the petty cash book are maintained on the basis of imprest system.
Advantages of Petty Cash Book
The advantages of Petty cash system enumerated are as follows:
- Fixed amount is paid to the petty cashier along with the imprest system.
- The Chief cashier is relieved from the cumbersome work of petty cash disbursement.
- The Cash book can be maintained properly as petty transactions are maintained separately.
- The Petty Cashier are paid as needed that helps to reduce the misappropriation of cash.
- The liability of the petty cashier is limited to imprest amount.
- The regular check of the petty cash book creates a sense of responsibility in the petty cashier.
Disadvantages of Petty Cash Book
- Petty Cash would be susceptible to a accounting errors because it has no sufficient documents for tracking the cash.
- Due to lack of control, Petty Cash are always in a chance of misappropriating of the fund. A petty cash can be theft by the employees of the organization.
- The fund of petty cash may be used in unauthorized expenses.
Format of Petty Cash Book