What is a petty cash book?

A petty cash book is a financial ledger that is used to record small, incidental expenses where the use of checks or electronic payments is impractical or inefficient. These small expenses might include items like office supplies, postage, taxi fares, and other minor company expenses.

The petty cash book is maintained by a petty cashier or a designated individual who has the responsibility for managing the petty cash fund. The process typically works as follows:

1. An initial amount of money is set aside for petty cash, taken from the main cash account, and recorded in the petty cash book. 2. As employees incur small expenses, they receive reimbursements from the petty cash fund after providing receipts or vouchers detailing the nature and amount of the expense. 3. The petty cashier records each transaction in the petty cash book, including the date, amount, recipient, and purpose of the expense. 4. When the petty cash fund is running low, the petty cashier will create a summary of the expenses, supported by the receipts or vouchers collected, to request a replenishment for the fund. This total amount is then replenished from the main cash account, and the petty cash book is updated accordingly. 5. Regular reconciliation is performed to ensure that the cash on hand and the remaining balance in the petty cash book match.

The purpose of maintaining a petty cash book is to properly manage small expenses without over-complicating the main accounting records. This helps maintain an organized and efficient financial record-keeping system for an organization.