In big business concerns it is found convenient to keep small sums of ready Cash with the petty cashier for the purpose of meeting small expenses such as postage, telegrams, stationery coolies charges cartage etc. The sum of money so kept with such a cashier is called petty cash and the book in which petty items of expenses are recorded is termed as petty cash book or columnar petty cash book.

A Petty Cash Book is generally maintained on a columnar basis a separate column being allotted for each type of expenditure. Petty Cash Book is not a book of original Entry. It is merely branch of the cash book. In this book we record petty cash received from the cashier and the details of the small payments made out of it.

The advantage of a columnar petty book is that it saves an enormous amount of un-necessary labour resulting from posting each item of petty payment separately in the

ledger. Features:

Petty Cash Book has the following features:

  1. Petty Cash payments are recorded in it chronologically.
  2. Receipts, however small they may be are not recorded in it.
  3. It is maintained by a separate cashier known as Petty Cashier.
  4. Its balance indicates petty cash in hand.
  5. It always shows debit balance – it can never show credit balance. Credit balance means credit side is heavier, i.e. payments exceed receipts, which is absurd. So the balance of Petty Cash Book will always be debit. It may, however, show nil balance, when receipts will equal payments, i.e. there is no petty cash in hand.
  6. It plays dual role. It is both a book of original entry as well as a book of final entry. In other words, it performs functions of both Journal and Ledger at the same time. All petty cash transactions are primarily recorded in it as soon as they occur; so it is a Journal. On the other hand, the cash aspect of all petty cash transactions finally recorded in Petty Cash A/c separately in the Ledger; so, Petty Cash Book is a Ledger.
  7. Only one aspect of petty cash transaction is posted to ledger account. The other
    aspect (i.e. cash aspect) needs no posting in petty cash account. Since Petty Cash Book is the substitute for Petty Cash A/c. no Petty Cash A/c is opened in ledger. Hence there is no question of posting in it.
  8. In the case of various expenses vouchers are not available, e.g. taxi hire, coolie
    charges, postage etc., where a slip is prepared incorporating therein details of the transactions and signed by a responsible official.
  9. Advantages: •Petty Cash Book has many advantages. It occupies an important position in modern accounting system. Its advantages are:‑I.                                 Since petty expenses are recorded in a separate book under the control of Petty

    Cashier, it reduces the workload and labour of Chief Cashier. So he can devote his attention to more important jobs.

    1. The number of transactions involving petty expenses is generally large. Since all
      these transactions are recorded in Petty Cash Book, Principal Cash Book cannot

    be bulky.

    1. Petty expenses, although small individually, involve a substantial amount in total,
      since the transaction are numerous. So the necessity of controlling these expenses is no less important. As the expenses are recorded separately under the care of a separate Cashier, their control becomes easier.
    2. Since cash transactions are divided into two, the benefits of division of labour are enjoyed.
    3. As the petty expenses are strictly controlled, the chances of misappropriating cash by the Petty Cashier are less.
    4. The amount of cash with the Petty Cashier being small, the propensity to spend is
      reduced. This helps keeping the amount of petty expenses within limits. It is clear from the above that Petty Cash Book is one of the most important

    books of account.

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