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Petty Cash Book

In every business, irrespective of its size or type, there is the need to make provision for a great variety of payments in cash of small amounts. Such payments may be regarded as sundry or incidental expenses on items like postage, carriage, printing and stationary, traveling expenses, etc. These are usually termed as petty cash payments and must receive careful attention because of the following reasons: (i) In a big business the number of petty payments is large. (ii) These payments recur at regular intervals. (iii) It is usually not possible (or rather impracticable) to issue a cheque in payment of any of them (iv) the person receiving payment may be an employee of the business. (v) In the total they may amount, period by period, to small sum. In a business where the policy is to deposit all cash receipts and make all payments by cheques, it will find that petty payments can be made more conveniently with cash. For the stand point of business, it is most desirable to separate the record of the petty cash payments from the main cash book. Such a necessity arises even in the case of a business which does not deposit all receipts because it is not convenient to clog the main cash book with all innumerable petty items, which necessitate the laborious analysis of various expenses. For this reason, a separate arrangement is made and it involves the use of a separate book of original entry called Petty Cash Book. The Petty Cashier, as he is called, receives a cash sum (or a cheque) for the estimated amount of payments for a certain period of time frequently, one month. In certain cases it is not possible to obtain receipts or vouchers especially when the payment is made for items like postage stamps or taxi charges. In such a case the printed vouchers bearing the name of the business are used and employees claiming cash for bus or taxi fare etc., has to fill up the same. The payment should be made only after the voucher has been passed by a proper authority.

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