May 21, 2022

SB-Accounting

Accounting + Finance Blog

Petty Cash Book Meaning and Key Explanations

Petty Cash Book Meaning and Key Explanations
Shares

Petty cash book is made to capture cash expenses that involve small amounts of money. Although this is not common with small businesses, large entities usually separate petty cash through their policies.

Definition of Petty Cash Book

A petty cash book is used to record expenses and income that didn’t require huge amounts. It is usually operated by a junior cashier of the entity. It is used for petty cash expenses.

Key Explanations

A Petty cash book is a subset cash book. This means that it is under the main cash book. In accounting, at the end of the month, the balance here is transferred to the main cash book balance. Both balances make up the cash and bank balance of the entity for the period under consideration. Therefore, petty cash balance is included in an entity’s cash and cash equivalents.

READ ON  Trade discount calculation and accounting entry

It is used for petty cash expenses. Yes, expenses can be on cash or credit terms. When it is on cash, it goes through the cash book. However, if the amount is small, the best option is to allow it to go through the petty cash book. The question that should come to your mind is, what amount is small?

This depends on the entity. Enterprise management usually sets a policy on what it considers to be a small amount or a large amount. For example, one entity may say that any amount less than 25,000 Naira must pass through the petty cash book. While another entity might be as high as one million Naira.

The expenses are cashed out through a junior cashier. That is a junior staff of the business. A good example of this is in the banking business in Nigeria. Most bank branches have a regular cash stand and the bulk cash stand. You can refer to those in the regular cash stand in the banking hall as junior cashiers. This means they operate a petty cash system. While those in the bulk cash room are the senior cashier. However, the main cashier is the treasury officer of the bank branch. He or she provides the cash needed by the other cashiers.

READ ON  Business transactions meaning and explanations

Conclusion

This book is used to record small cash expenses. The staff that operates this book is referred to as the junior cashier. He or she works under the main cashier.

Shares