Petty Cash Fund

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Overview

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. This note has information about petty cash fund and various systems used in it.
Petty Cash Fund

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. 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.

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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.

Systems of Petty Cash Fund

The petty cash fund can be operated in the following two ways: -

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  1. Ordinary system of petty cash fund
    Under this system, the petty cashier is given a certain amount of cash for meeting petty expenses. When the petty cashier spends nearly the whole amount, he submits the account of expenses along with the surplus amount. If necessary, the petty cashier will be given another sum for petty payments for next periods.

  2. Imprest system of petty cash fund
    It is a more popular system of the petty cash fund. Under this system, the petty cashier is given a certain amount of cash usually at the beginning of the accounting year. At the end of each month, the petty cashier submits the accounts of expenses keeping surplus amount himself. At the beginning of the next month, the main cashier gives the petty cashier another sum which is equal to the amount spent by him during the previous month as reimbursement of the fund. Thus, the petty cashier begins the next period with the same amount of fund, which is known as float. The system in which the petty cash fund is reimbursed for the petty expenses incurred is called imprest system of the petty cash fund.
    Imprest system of petty cash fund is better than the ordinary system because:
    • It helps in timely reporting and checking. Thus, the errors, if any, can be rectified by the main cashier soon.
    • It does not allow the petty cashier to keep idle cash with him as the float can be reduced if found more than necessary.
    • It helps ultimately for effective control of the misutilization of the petty cash fund.
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. 
  • Under ordinary system of petty cash fund, the petty cashier is given a certain amount of cash for meeting petty expenses. 
  • Under imprest system of petty cash fund, the petty cashier is given a certain amount of cash usually at the beginning of the accounting year.
  • 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.
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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.

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