Banks Notes

What is Cash Book and Petty Cash Book? Banking Notes

— May 7, 2022 add comment
cash book and petty cash book

What is Cash Book?

  • Cash book is the book of information prepared on the basis of financial transaction of cash inflow and cash outflow in given period of time.
  • Cash book excludes the credit transactions.
  • Cash book acts as ledger and journal at once.
  • In general, cash book is the description of cash inflow and cash outflow of the organization.
  • Cash book is sub-division of journal and subsidiary book.
  • Ledger is the real account.
  • Use of contra-entry i.e if a debit entry is recorded in an account, then it will also be recorded in the credit side and vice-verca.
  • Cheque received but not deposited in the bank should be recorded as cash receipt.
  • Credit transaction is not recorded.
  • Contains two columns, received cash is posted in the debit side and paid cash is posted in the credit side.

Types

  1. Single column cash book
  2. Double column cash book
  3. Triple column cash book

What is Petty Cash Book?

Petty cash book is small book that keeps records of all the small transaction occurs in the organization. Small transactions such as tea/coffee expenses, taxi fare, stationary, water expenses etc.  Petty cash fund effectively manages the small transactions. Petty cash book is maintained by the petty cashier.

Types

  1. On the basis of imprest
    • Imprest petty cash fund
    • Non-imprest petty cash fund
  2. On the basis of expense record
    • Simple petty cash fund
    • Analytical cash fund

Importance/objectives of Petty Cash Book

Large organizations with large petty transaction usually maintain separate petty cash book in order to effectively manage the petty cash funds. Following points highlights the importance of petty cash book.

  1. It maintains the petty transaction payment systematically.
  2. It supplies information regarding petty payments  easily and quickly.
  3. Helps to control the petty expenses by comparing the petty expenses of two different period of time.
  4. Reduces the burden of petty transaction for head cashiers.
  5. Saves time because each payment made under the particular head is not posted into the ledger separately.

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