Petty Cash Book and Petty Cash Fund

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Overview

Petty cash book is one in which all small items of expenses are recorded in a systematic manner made through petty cash fund. This note has information about petty cash book and petty cash fund.
Petty Cash Book and Petty Cash Fund
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Petty Cash Book

A government office required to pay different types of petty expenses daily. It is impractical and inconvenient for paying such petty expenses, like bus fair, cartage, and postage stamp through cheque. To pay such petty expenses directly in cash, every government office creates petty cash fund. All petty expenses are paid through this fund and their records are made in a separate book, which is known as petty cash book. Hence, the petty cash book is one in which all small items of expenses are recorded in a systematic manner made through petty cash fund.

Petty Cash Fund

Petty cash fund is an amount kept by government offices for meeting petty expenses. The petty cash fund is also known as float, which means fixed amount meant for meeting petty expenses. The government accounting system has provided for creating petty cash fund as per the requirement of the office. All the petty expenses incurred are recorded in a form coded A.G.F. No. 22, which is called petty cash book or petty cash fund account. 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.

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Objectives

The following are the main objectives of petty cash fund:

  • To facilitate for paying petty expenses
  • To save valuable time
  • To facilitate for keeping records
  • To facilitate for posting
  • To facilitate for controlling petty expenses
  • To reduce the burden of concerned authority

Importance and Advantages

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

  • It facilitates to pay expenses in cash immediately.
  • It helps to make a record of all petty payments systematically.
  • It facilitates for posting petty transactions in the bank cash book and budget sheet.
  • It facilitates for controlling the embezzlement of cash in an effective manner.
  • 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.
  • It helps in timely reporting and checking of petty expenses. Thus, the errors, if any, can be located and rectified easily.

Forms used for operating Petty Cash Fund

The following types of forms are used for operating the petty cash fund: -

  • Cash Payment Voucher (AGF No. 6)
    Cash payment voucher is a form of original entry of petty cash payment out of the petty cash fund. This form is used to make systematic recordings of the petty payments made. This form is also prescribed by the Office of the Auditor General and is coded A.G.F No. 6.

  • Cash payment slip and cash control form (AGF No. 7)
    This form is used to check and control the misuse of cash payment slip used for making payment from petty cash fund. The leaf of cash payment slip is pre-numbered and it is issued to a petty cashier who handles petty cash fund.

  • Petty cash book/ Petty cash fund account (AGF No. 22)
    Petty cash book or petty cash fund is a book maintained by a petty cashier to record the petty expenses in operating level government offices. The form is coded A.G.F. No. 22.

  • Request for the reimbursement of cash payment form (AGF No. 6(A))
    The expenses made out of the petty cash fund are periodically reimbursed to a petty cashier. For the requisition of reimbursement payments, the petty cashier uses a form called requisition form for the reimbursement of cash payment coded A.G.F No. 6(A) and submitted to the chief accountant for reimbursement.
Things to remember
  • Petty cash book is one in which all small items of expenses are recorded in a systematic manner made through petty cash fund.
  • Petty cash fund is an amount kept by government offices for meeting petty expenses.
  • Cash payment voucher is a form of original entry of petty cash payment out of the petty cash fund.
  • The government accounting system has provided for creating petty cash fund as per the requirement of the office. 
  • 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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Questions and Answers

Solution:

Date

Particulars

JV No.

Debit

Credit

Dr./Cr.

Balance

Kartik 1

Balance b/d

400

Kartik 5

Payment for water supply charges

C.P.S. No.

50

Dr.

350

Kartik 8

Payment for wages for repairs and maintenance

C.P.S. No.

60

Dr.

290

Kartik 10

Payment for refreshment expenses

C.P.S. No.

15

Dr.

275

Kartik 15

Payment for telephone charges

C.P.S. No.

20

Dr.

255

Kartik 20

Payment for purchase of stationery

C.P.S. No.

50

Dr.

2-5

Kartik 25

Payment for purchase of pens

C.P.S. No.

25

Dr.

180

Kartik 30

Reimbursement of petty

220

Dr.

400

Date

Particulars

JV No.

Debit

Credit

Dr./Cr.

Balance

Baishak 1

Create petty cash fund

Dr.

500

Baishak 7

Purchase of stationery

C.P.S. No.

50

Dr.

450

Baishak 9

Postage and telegram

C.P.S. No.

40

Dr.

410

Baishak 11

Expenses of tea

C.P.S. No.

25

Dr.

385

Baishak 13

Telephone charges

C.P.S. No.

30

Dr.

355

Baishak 17

Payment for water supply charges

C.P.S. No.

60

Dr.

395

Baishak 25

Wages for maintenance

C.P.S. No.

15

Dr.

280

Baishak 31

Above expenses were reimbursed

220

Dr.

500

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