Meaning, Types and Importance of Petty Cashbook

Meaning of petty cash book 

      The word 'Petty' is derived from the French word 'Petit' which means small. The person who maintains the petty cash book is known as Petty cashier. The person who maintains the main cash book and advance money to Petty cashier to meet petty expenses is the main or head cashier.

      A business enterprise has various departments like production, finance, research and development has a number of repetitive transaction involving small amount. It is not practical to pay for small expenses by cheque. Moreover recording these transactions in the main cash book will lead to overburdening the cash book. Control over cash balance and cash payments Will be lost. Hence, trader maintains a separate cash book to record small expenses which are repetitive in nature and cannot be paid by cheque. This cash book know as "Petty Cash Book".

Types of petty cash book :

There are two types of petty cash book. Are as follows : 

1. Simple petty cash book :  

        Simple petty cash book is divided into two sides, a receipt side and a payment side. Cash or cheque received from the head cashier is recorded in the column of amount received and petty expenses paid recorded in the column of amount paid. Simple petty cash book has one common 'Date' column and 'particulars' column for receipt side and payment side. This is because the transaction on the receipt side limited to cash or cheque received from the head cashier.   Remaining transactions are related to payment of various petty expenses.
Transactions recorded in simple petty cash book are to be posted to respective expenditure accounts in the ledger. Simple petty cash book has only one payment column where all payments into different groups and post it to respective ledger. This requires additional labour and time, therefore businessmen do not use simple petty cash book in practice.


2) Analytical petty cash book : 


          This petty cash book is prepared on the same lines of the simple petty cash book. The only difference is that the payments side ruled into suitable column for recording expenses that are repetitive in nature. e.g. nominal accounts like postage and telegrams, printing and stationery, carriage cartage, and coolie charges, sundry, expenses etc. There is no hard and fast rule for the number of columns in the analytical petty cash book. It varies according to the transactions carried out by trader. In addition to these columns ledger account column is prepared for making payment towards personal or real accounts. Since the payment side of this petty cash book is divided or analysed into different columns it is called analytical or columnar petty cash book.



Importance of Petty cash book :

A) Petty cash book helps in separating large expenses from small expenses.

B) Petty cash book enables division of work. The main cash and main cashier is not burdened with petty small entries. This help him to concentrate more towards the accuracy of main cash book.
 
C) Clerical work of posting is reduced as there is no need to post each expense separately in the ledger. At the end of the accounting period, the total of particular expenditure is posted to respective ledger.
D)Moreover maintaining petty cash book being rather simple can be assigned to newly appointed accounting personal.

 E) Effective control over cash balance and cash payments can be exercised.