Petty Cash Fund

Subject: Accountancy

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Overview

The petty cash fund is an amount, which is maintained by the government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. These types of expenditures occur in government offices frequently. This note has information about petty cash fund.
Petty Cash Fund

The petty cash fund is an amount that is maintained by government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. These types of expenditures occur in government offices frequently. For making payment of such small amount of expenditures in cash, a fund is created by the office, which is known as petty cash fund. All the petty expenses are paid through this fund. These expenses are recorded in a separate book systematically which is known as petty cash book. It has been designed under the format of AGF No. 22.

At the beginning of the fiscal year, the petty cash fund is created. At the end of each month, the petty cash fund is reimbursed. At the end of the fiscal year, the petty cash fund is closed by depositing the surplus amount in the bank.

Objectives

The main objectives of petty cash fund are as follows: -

  1. To facilitate for paying petty expenses
    The petty cash fund helps to pay petty expenses directly in cash. It facilitates the accountant to pay petty expenses easily. It removes the difficulties for issuing many cheques for small expenditures.

  2. To save valuable time
    The office should pay a small amount of expenditures to the concerned parties immediately. It is impracticable for paying small expenditures through cheque. It takes a long time to issue and encash the cheque. Hence, the petty cash fund saves valuable time by paying small expenditures in cash.

  3. Keeping Records
    Keeping Records
    To facilitate for keeping records
    The petty cash fund helps to record the small expenditures with greater ease. It is difficult to maintain journal voucher and ledger for small expenditures. The petty cash fund removes this difficulty maintaining a single journal voucher at a time.

  4. To facilitate for posting
    All the expenditures are recorded in the journal voucher at a time while reimbursing the fund. It facilitates for posting a large number of petty transactions at once in the bank cash book and budget sheet.

  5. To facilitate for controlling petty expenses:
    It makes possible for making a comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively.

  6. To reduce the burden of concerned authority:
    It reduces the burden of concerned authority as he is not required to handle petty transactions and hence he will have enough time to manage and control major cash transactions more effectively.


Importance and Advantages

The importance and advantages of petty cash fund are as follows: -

  1. It facilitates to pay expenses in cash immediately.
  2. It helps to make a record of all petty payments systematically.
  3. It facilitates for posting petty transactions in the bank cash book and budget sheet.
  4. It facilitates for controlling the embezzlement of cash in an effective manner.
  5. It helps to supply information regarding petty payments made on different heads more easily and quickly due to their systematic record in the petty cash book.
  6. It helps in timely reporting and checking of petty expenses. Thus, the errors, if any, can be located and rectified easily.
Things to remember
  • The petty cash fund is an amount, which is maintained by government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. 
  • At the beginning of the fiscal year, the petty cash fund is created.
  • At the end of each month, the petty cash fund is reimbursed.
  • At the end of the fiscal year, the petty cash fund is closed by depositing the surplus amount in the bank.
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
Questions and Answers

The importance and advantages of petty cash fund are as follows: -

  1. It facilitates to pay expenses in cash immediately.
  2. It helps to make a record of all petty payments systematically.
  3. It facilitates for posting petty transactions in the bank cash book and budget sheet.
  4. It facilitates for controlling the embezzlement of cash in an effective manner.
  5. It helps to supply information regarding petty payments made on different heads more easily and quickly due to their systematic record in the petty cash book.
  6. It helps in timely reporting and checking of petty expenses. Thus, the errors, if any, can be located and rectified easily.

The main objectives of petty cash fund are as follows: -

  1. To facilitate for paying petty expenses
    Petty expenses can be paid directly in cash from the petty cash fund. It facilitates the accountant to pay petty expenses easily. It removes the difficulties for issuing many cheques for small expenditures.

  2. To save valuable time
    The office should pay a small amount of expenditures to the concerned parties immediately. It is impracticable for paying small expenditures through cheque. It takes long time to issue and encash the cheque. Hence, the petty cash fund saves valuable time by paying small expenditures in cash.

  3. To facilitate for keeping records
    The petty cash fund helps to record the small expenditures with greater ease. It is difficult to maintain journal voucher and ledger for small expenditures. The petty cash fund removes this difficulty maintaining a single journal voucher at a time.

  4. To facilitate for posting
    All the expenditures are recorded in the journal voucher at a time while reimbursing the fund. It facilitates for posting the large number of petty transactions at once in the bank cash book and budget sheet.

  5. To facilitate for controlling petty expenses:
    It makes possible for making a comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively.

Any two objectives of petty cash fund are as follows:

  1. To facilitate for paying petty expenses
  2. To facilitate for keeping records

Any two importance of petty cash fund:

  1. It facilitates to pay expenses in cash immediately.
  2. It helps to make a record of all petty payments systematically.

The petty cash fund is an amount, which is maintained by government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. These types of expenditures occur in government offices frequently.

Government of Nepal

AGF No. 22

….Office/Dept./Ministry

Petty Cash Book/ Account

Date

Particulars

JV No.

Debit

Credit

Dr./Cr.

Balance

Rs.

Paisa

Rs.

Paisa

Rs.

Paisa

Bhadra 1

Balance b/d

Dr.

150

Bhadra 2

Cheque received

350

Dr.

500

Bhadra 5

Paid for refreshment

001

30

Dr.

470

Bhadra 8

Paid for taxi fare

002

70

Dr.

400

Bhadra 15

Paid for labour charges

003

38

Dr.

362

Bhadra 16

Paid for stationery

004

20

Dr.

342

Bhadra 29

Paid for newspaper

005

50

Dr.

292

Government of Nepal

AGF No. 22

….Office/Dept./Ministry

Petty Cash Book/ Account

Date

Particulars

JV No.

Debit

Credit

Dr./Cr.

Balance

Rs.

Paisa

Rs.

Paisa

Rs.

Paisa

Jestha 1

Dr.

400









Jestha 5

Payment for water supply charges

50

Dr.

350

Jestha 8

Wages for maintenance

60

Dr.

290

Jestha 10

Expenses for tea

15

Dr.

275

Jestha 15

Telephone charges

20

Dr.

255

Jestha 20

Purchased stationery

50

Dr.

205

Jestha 25

Purchased pens

25

Dr.

180

Jestha 30

Reimbursement of petty cash fund

220

Dr.

400

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