Petty Cash Book
Payments in cash of small amounts like traveling expenses, postage, carriage etc. are petty cash expenses. These petty cash expenses are recorded in the petty cash book. The petty cash book is maintained by \separate cashier known as petty cashier. It is also called the Imprest System of maintaining petty cash. The petty cashier is given a certain sum of money at the beginning of the fixed period (e.g. a monthly fortnight) which is called float. The amount of float is so fixed that it may be adequate to meet petty expenses of the
prescribed period. The balance in the petty cash book shows cash lying with the petty cashier.
The advantages of the imprest system are as follows:
— It saves the time of the chief cashier.
— Petty cashier is not allowed to keep idle cash with him if the float is found to be more than adequate; its amount will be immediately reduced. This reduces the chances of misuse of cash by the petty cashier.
— As the sum of float is small, it does not provoke the person in charge of it or others in the office to misappropriate it.
— The record of petty cash is checked by the cashier periodically, so that a mistake if committed is soon rectified.
— It enables a great saving to be effected in the posting of small items to the ledger accounts.
— The system trains young staff to handle money responsibilities.