You can find the questionsanswerssolutions for the chapter 4 of cbse class 11 accountancy in this page. The petty cash book will be maintained by a separate cashier known as petty cashier in the accounting field. Petty cash, in simple terms, is an amount of money that a business has available to pay for something inexpensive, so an employee doesnt have to use their own money. When a business doesnt provide access to company credit cards, or employees would rather not wait to be reimbursed for purchases, using petty cash is a simple alternative. Since only cash transactions are recorded in the cash book it is a special journal. These mcqs are very helpful for the preparation of various posts of senior auditor, junior auditor, accountant and for cost accountant. Cash book is a subsidiary book which records the receipts and payment of cash. Small or large companies maintain 2 types of petty cash book for all cash. Difference between cash book and cash account with. A separate column is allotted for each type of expenditure. Petty cash book format example definition explanation. The balance of cash book always means cash in hand.
There are two primary types of entries in the petty cash book, which are a debit to record cash received. Business accounting tutorial petty cash book petty cash book in almost all businesses, it is found necessary to keep small sums of ready money with the cashier or petty cashier for the purpose of meeting small expenses such as postage, telegrams, stationary and office sundries etc. The most common way of accounting for petty cash expenditures is to use the. He is the sole author of all the materials on accountingcoach. Ppt petty cash book powerpoint presentation free to. It is a business journal that records the cash receipts and cash payments of a business for the particular accounting year. She keeps the cash book herself but her accountant writes up her ledger each month. Petty cash book helps in making the records of cash transactions uptodate because of division of labor in recording cash transactions. Petty cash book helps in making the main cash book more informative, clean and clear by including only major transactions. In most cases, the petty cash book is an actual ledger book. Petty cash book is an accounting book used for recording expenses which are small and of little value, for example, stamps, postage and handling, stationery, carriage, daily wages, etc these are expenses which are incurred day after day. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. Relatively small amount of cash kept at hand for making immediate payments for miscellaneous small expenses.
The difference between petty cash and cash on hand bizfluent. In most cases, the petty cash book is an actual ledger book, rather than a computer record. A petty cash is a cash book used to enter all small or petty expenses obtained. In almost all businesses, it is found necessary to keep small sums of ready money with the cashier or petty cashier for the purpose of meeting small expenses such as postage, telegrams, stationary and office sundries etc. This page contains the cbse accountancy class 11 chapter recording of transactions ii notes. It is another cash book which is maintained, generally, in large business concerns to reduce the burden of main cash book, in which numerous transactions involving petty small amounts are recorded. Cash book short questions and answers play accounting.
In big business firms, all payments are made by cheques and all receipts are banked. A petty cash fund is an amount of cash that a business uses to make small, miscellaneous purchases. Petty cash is also the title of the general ledger current asset account that reports the amount of the companys petty cash. Under this system the petty cashier at first receives from the chief cashier a fixed sum of money for meeting. Sohara puts her cash receipts in a till and enters them into her threecolumn cash book each week. Cash book records all receipts of and payments in cash.
Businesses generally keep small amounts of cash to meet small miscellaneous payments such as entertainment expenses and stationery costs. The petty cash book is a recordation of petty cash expenditures, sorted by date. Carrying on with our accounting question blog series, this week were focusing on petty cash primarily what it is, the main procedure behind it, and how you can use clear books to record your expenditure what is petty cash. Petty cash book definition of petty cash book by the. A cash book is also known as the book of original entry. Petty cash book is a ledger book, which is used to record petty cash. Petty cash book is the accounting book that is used for the purpose of recording the petty cash expenditure i. The difference between the total of the debit items and that of the total column on the credit represents the balance of the petty cash in hand. This type of petty cash book is known as analytical petty cash book. Instead of issuing a purchase order to buy these items, many businesses use a petty cash fund. The petty cash book is a formal summarization of petty cash expenditures, sorted by date. The following financial accounting mcqs are collected from different past papers and from accounting mcqs bank. Petty cash is an easy to understand and familiar method of paying for company expenses. Petty cash book saves time because each payment under particular head is not.
This is the only amount of cash that is not immediately deposited in the bank account after it is received. With the help of cash book cash and bank balance can be checked at my point of time. Recording of transactions ii petty cash book solutions. Petty cash is a small amount of cash that a business has on. Recording in a petty cash book does not require formal knowledge of accounting principles and techniques time saving. A petty cash book is a ledger kept with the petty cash fund to record amounts that are.
This is the maximum amount of cash that can be held at any time. This type of cash book will allow managementproprietors to tell at a glance the total amount spent on each of these common expenses. Test your learning about cash book chapter by answering 6 short questions given below. Examples include postage due, reimbursement to employees for small purchases of office supplies, and numerous similar items. Petty cash, also known as imprest cash, is a fund established for making small payments that are impractical to pay by check. Petty cash should be part of an overall business accounting system that. As only totals of various columns are to be posted in the. There are two primary types of entries in the petty cash book, which are a debit to record cash. Check out our video on petty cash book for accounts. Petty cash book is a type of cash book, which use to record small amount of receipts and payment. These are expenses which are incurred day after day. Petty cash book may be treated either as a part of the double entry system or merely as a memoranda book. Petty cash is a small amount of cash that is kept on the company premises to pay for minor cash needs.
Examples of these payments are office supplies, cards, flowers, and so forth. Petty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing, and then cashing the cheque. Liquidity management in a cash book helps a company to determine the amount of cash that the company has at any given time, either at the end of a day or a week. The establishment of a petty cash system begins by making out a check to cash, cashing it, and placing the cash in a petty cash box. The reason for replenishing the fund at the end of the accounting period is that no record of the fund expenditures is in the accounts until the check is written and a journal entry is made.
Petty cash book is an accounting book used for recording expenses which are small and of little value, for example, stamps, postage and handling, stationery, carriage, daily wages, etc. Also included as a part of cash are the balances kept at banking and financial institutions. A petty cash account is simply money kept on hand to pay for minor cash items such as stamps, office supplies, tips, parking tolls, etc. Petty cash is often used to pay for postage, small office supplies, and other small purchases. It is an accessible, convenient way to pay for small purchases. The entries related to receipt and payment of cash are first recorded in the cash book and then posted to the relevant ledger accounts. Cash includes currency and coins, although most businesses do not keep much of this type of cash around. Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. The cash book serves the purpose of the journal and ledger. A petty cash book is an accounting book used for recording expenses which are small and of little value, for example stamps, postage and handling, stationery. If the former course is adopted, each payment to petty cashier is shown on the credit side of the main cash book which is considered to have been balanced by a debit entry in the petty cash book.
Petty cash definition of petty cash by the free dictionary. The cash book works exactly like a cash account, but when the transactions are enormous, then cash book is preferred. The petty cash book is defined as relatively small amount of cash kept at hand for making quick payments for miscellaneous small expenses in the business concern. So is the case if you are looking for cbse class 11 commerce related topic. What is petty cash book write the advantages of petty cash.
If you find difficulty in answering these questions, read cash book chapter thoroughly from explanation section of the website. Petty cash is a fund your business keeps on hand for small purchases, while cash on hand is the sum of all your available cash. Petty cash book is maintained to record small expenses such as postage, stationery, telegram. With this information, the senior executives can quell the doubts that financial commentators might have on the state of liquidity of the company and operational capacity of senior leadership. The is only one money column on the debit side and all sum received from time to time by the petty cashier from the chief cashier are entered in it.
Petty cash book is a type of cash book that is used to record minor regular expenditures such. There are numerous small payments on account of expenses like stationery, cartage, coolie hire, refreshments to guests etc. A cash book is a type of subsidiary book where cash or bank receipts and cash or bank payments made during a period are recorded in a chronological order. It works as a book of original entry as well as a ledger account. For this purpose, a cheque is given to the petty cashier for a definite sum of money.
The sum of money so kept in hand generally termed as petty cash and book in which the petty cash expenditures are recorded is termed as petty cash. In an analytical petty cash book, there exists separate heads for different petty expenses, which makes recording much easier. Usually the deposits into bank accounts maintained by a business firm, withdrawals from such accounts and cheque payments are also recorded in the 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 definition, types, format, examples. Moreover, a cash book is a substitute for cash account in the ledger. Definition of petty cash petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Companies replenish the petty cash fund at the end of the accounting period, or sooner if it becomes low. Petty cash book accounting letstute accountancy youtube. Petty cash or the petty cash fund is a small amount of cash on hand used for paying expenses too small to merit writing a check. The balance of cash book and cash of a cash box must be equal. For this purpose, a petty cashier is appointed by the chief cashier. Thus, the book is part of a manual recordkeeping system.
The posting from the petty cash book to the respective accounts in the ledger are made directly in total at the end of every month or. The book in which all cash transactions either cash is received or paid are primarily recorded according to dates, is called cash book. Meaning of petty cash book, its importance and advantages. In the world of business, a number of miscellaneous expenses can come up on a daytoday basis. Such payments are generally handled by a petty cash imprest system whereby an amount of float is fixed. We suggest you try to answer each question yourself before clicking on the see answer button. The credit side consists of several analysis columns. There might be a petty cash drawer or box in each department for. Read this article to learn about the recording of transactions in cash book and journal. It can be used literally to mean the actual bills and coins you have available to spend, including the amount in your petty cash fund. Accounting for petty cash explanation, related controls.
Recording of transaction in cash book and journal with. How to set up and maintain a petty cash account basic. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and. Petty cash is the small amount of cash that is kept on hand by a company to pay for minor, inexpensive purchases during the normal course of operations. The definition of petty cash book group members power point excel conclusion p.