Centralized system minimizes the employee costs and secure the materials but at the same time they have to pay big amount for transport cost for centralized inventory system. 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. Nov 02, 2019 the regular check of the petty cash book creates a sense of responsibility in the petty cashier. What are the advantages of using the imprest system. The image above is a sample of petty cash book advantages and disadvantages. Some of your workers could use the cash for purchases such as lunch or other personal needs that do not benefit your business. Cash book definition, explanation types and advantages. Columnar petty cash book and its preparation process. Advantages and disadvantages of receipt and payment account. Meaning of petty cash book, its importance and advantages. It is possible to find out daily cash and bank balance. Learn more about petty cash expense management, and decide which system is right for your business.
Recording in a petty cash book does not require formal knowledge of accounting principles and techniques. Oct 26, 2019 both centralized and decentralized store has some advantages and disadvantages. More and more cashonly businesses are weighing the pros and cons of their payment system. Petty cash book is maintained by the petty cashier. It relieves the cash book and the chief cashier of the burden of recording tiny and frequent payments. Here all the cash and bankrelated transactions are recorded along with the discount on sales or purchase of goods. It is an accessible, convenient way to pay for small purchases. Cash is fast, convenient and gets things done thanks to its almost universal acceptance. It relieves the cash book and the chief cashier of the burden of recording tiny. What is the importance of petty cash in a business. You may learn more about accounting basics from the following articles mark to market accounting explain.
The advantages of treble column cash book are stated below, time and laborsaving a good deal of time and labor are saved because for maintaining a treble column cash book cash account, bank account and discount accounts are not needed to. Jun 18, 2019 the triple column cash book is a compact form of cash book in which all the three columns, i. While partnerships carry some clear advantages, there are also several disadvantages to consider. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers. This is why cash transactions are recorded in a separate book named cash book. Advantages of the imprest system of keeping petty cash the petty cash book is used to record small payments.
For this purpose, a petty cashier is appointed by the firm, to pay for small payments usually below rs. The system is a form of managing petty cash in a business. It is one of the main books of account maintained by operating the private and government sector. Due to lack of control, petty cash are always in a chance of misappropriating of the fund. Petty cash would be susceptible to a accounting errors because it has no sufficient documents for tracking the cash. Much advancement in technology, particularly on the internet, deters or even flat out prohibits cash payments.
In addition, using cash simplifies budgeting, since you can just look at the cash in your hand to see whats left instead of looking at an online registry or calling your card company for a balance. If all these payments are recorded in the cash book, it will become unnecessarily heavy. The main advantages of imprest system of petty cash are as follows. Here are some advantages and disadvantages to using petty cash as an expense management solution. People who use cash spend less than those who use credit and debit cards, according to the science daily website. Petty cash book maintains records of all petty payments systematically. So, the book, wherein day to day petty expenses for a particular period of a business concern, are recorded in chronological order of dates is called petty cash book. Commission of fraud is reduced as the chief cashier verifies petty cash book alongwith vouchers and the petty cashier is more responsible. Frauds involving cash are likely to be minimized and where committed are likely to be detected at an early stage. Advantages and disadvantages of paying with cash pocketsense. Petty cash would be susceptible to a accounting errors because it. The disadvantage of a petty cash book is that it contains so many small entries. The main advantages and disadvantages of preparing receipt and payment account can be pointed out as follows. What are the main advantages of maintaining cash book.
In some cases, a company can even use this process to create income statements and other reports for future use. Advantages and disadvantages of analytical petty cash book qs. Such payments include postage, reimbursement to employees for small purchases of office supplies and numerous similar items. Besides maintaining a main or general cash book, many companies also maintain a small cash book known as petty cash book to record small day to day expenditures of the business. Petty cash book relieves the main cashier because it is prepared by the petty cashier. Here we discuss the format of petty cash book, types of petty cash systems including the ordinary and imprest system along with its advantages and disadvantages. The petty cash book is checked by the chief cashier at the end. Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fares, fuel. What are the advantages of maintaining a petty cash book. As head cashier checks the accounts of previous month and gives advance for the. The petty cashier has liability not to expend the petty cash more than.
As we know, petty cash book advantages and disadvantages is important for our business. It is both a book of original entry as well as a book of final entry. Many expenses of small nature are recorded in petty cash book. If we do not maintain a cash book and record all cash transactions in the journal, unnecessary time and labor would be required for debiting and. The book in which all cash transactions either cash is received or paid are primarily recorded according to dates, is called cash book. The cash receipts and disbursements method is a budgeting process. Petty cash book 2019, imprest system of petty cash advantages. The advantages of using a petty cash book are as follows. What are the advantages of a imprest system for petty cash. Any new enterprise owner need to know the significance of knowing how you can get ready a blank invoice template as this is the to start with move to finding paid out. Overall, petty cash is a largely outdated and inefficient system. Advantages and disadvantages of analytical petty cash book. Below are the main advantages of using cash accounting for financial reporting and tax purposes. The maintenance of petty cash book does not require specialised knowledge of accounti.
Fixed amount is paid to the petty cashier along with the imprest system. In almost all businesses, the bulk of transactions related to cash receipts and payments. Petty cash is a comprehensible and common method of paying for business operating cost. Cash accounting can also be costeffective, especially if your business structure is a sole proprietorship or partnership. The advantages of petty cash system enumerated are as follows. A petty cash book gives management a record of all the little. Advantages and disadvantages of fixed installment method of. When petty cash is easy to get to employees, it is a suitable way to pay for little purchases. As the petty cashier has to account for his expenses, before he can draw further sums, the petty cash book remains up to date. What is the different cash book and petty cash book. Here we discuss the format of petty cash book, types of petty cash systems.
As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced. Cash and bank transactions can be recorded in cash book. Most cash should be deposited right away in the bank, but a small amount can be kept on hand in a petty cash account earmarked for minor. Cash book could be a checking or other type of money access account. To avoid this all cash transactions are straight away recorded in the cash book which is in the form of a ledger. For example, due to unlimited liability, each partner in a general partnership is equally and personally liable for all the debts of the partnership. The advantages of analytical petty cash book are given below. When cash transactions are recorded in the journal a lot of time and labour will be involved. What are the advantages of the petty cash book answers. Petty cash is an easy to understand and familiar method of paying for company expenses.
The advantages of using the imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. Using imprest, the petty cash of a company is kept at a constant rate. The triple column cash book is a compact form of cash book in which all the three columns, i. Petty cash book can be maintained either in a simple or in analytical way. The advantages of analytical petty cash book is given below i. 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. All accounting methods have advantages and disadvantages, and there isnt one method that will work well for every business. Advantages and disadvantages of analytical petty cash book simple method. Sep 30, 2019 is the petty cash box a help or a hindrance. Petty cash is money on hand what are the disadvantages of cash flow. You need to develop a set of policies or procedures dictating the handling of cash in your business to avoid problems such as theft and misappropriation. Meaning of petty cash book a petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically.
Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively. If we do not preserve a cash book and record all cash transactions in the journal, redundant time and labor would be necessary for debiting and crediting cash account in reverence of every cash transactions. If like all other transactions cash transactions are also recorded primarily in journal, the cash aspect of the transactions will be required to be posted to cash ac, in the ledger separately. Definition and explanation of cash book format, advantages. The amount of the imprest should be as low as possible and the number of floats in use should be kept to a minimum. Recording transactions on the basis of vouchers and. Outline the advantages of the imprest system as a system to. Cash book also serves the purpose of book of original entry as well as ledger. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly. Marks the advantages of using the imprest system are.
Many expenses of small nature recorded in petty cash book, the number of transactions is reduced in the cash. The imprest system principles of accounts singapore. As its name indicates, cash accounting is primarily concerned with one thing. If like all other transactions cash transactions are also recorded primarily in journal, the cash aspect of the transactions will be required to be posted to cash a c, in the ledger separately. As a small business owner, its important to understand the advantages and disadvantages of cash basis accounting to decide if its right for your small business. The disadvantages of cash flow are that accurate figures are needed as an input to get the same quality. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well. However, in an everchanging marketplace, consumers should consider the pros and cons of paying with cash. Petty cash book helps in making the major cash book more informative, clean and clear by including only major transactions. Importance and advantages of petty cash book business performing a large number of petty transactions usually maintain a separate petty cash book. These are expenses which are incurred day after day. The format of a triple column cash book is given below.
The main benefits or advantages of petty cash book can be pointed out as follows. The main advantages of petty cash book publish your article. Both centralized and decentralized store has some advantages and disadvantages. As head cashier checks the accounts of previous month and gives advance for the coming month, thus, errors if any are reduced 2. A s the petty cashier has to produce to the chief cashier the petty cash book for inspection, it acts as a healthy check on the petty cashier. In an analytical petty cash book, there exists separate heads for different petty expenses, which makes recording much easier. Companies use actual information for cash collections and payments to create a budget. The cash book can be maintained properly as petty transactions are maintained. A cash book which is created for the small payments of an organization i. Passbook savings accounts are great for those who want to save without worrying about minimum balances and monthly fees. Management will decide what kind of store exactly needed according to their size of business. In an imprest system, the amount in hand plus the amount of all receipts should be equal to petty cash balance. Guidelines for petty cash funds guidelines for payment advantages of using petty cash disadvantages of using petty cash highlights of petty cash fund.
Advantages, disadvantages, and the pex alternative. The chief cashier is relieved from the cumbersome work of petty cash disbursement. Petty cash book is a ledger book, which is used to record petty cash expenses formally in chronological order, with the date. In a business house a number of small payments, such as for telegrams, taxi fare, cartage, etc. These accounts usually have no fees or monthly balance requirements. The regular check of the petty cash book creates a sense of responsibility in the petty cashier.
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