HOW TO PREPARE ANALYTICAL PETTY CASH BOOK?

Hey! Till now, In cash book lesson, we learned about simple cash book, double column cash book and triple column cash book, today I’m going to teach you how to prepare petty cash book using imprest system?

WHAT IS PETTY CASH BOOK?

 In a business a number of small payments, such as for stationery, telegrams, taxi fare, cartage etc have to be made. Usually firms appoint a person as Petty cashier to make these small payments. Petty cahier will record the petty payments in a book called “petty cash book”. It is maintains just like the cash book. Money received from head cashier is recorded on debit side and payments are recorded on credit side. It is also called as analytical petty cash book, as it analysis the payments under different heads separately. Generally petty cash book is maintained on Imprest system.

IMPREST SYSTEM

Under this system management estimates the expenditure roughly for a period of week or month. Head cashier will give the petty cashier the estimated amount to start with. Petty cashier makes payment & records the transactions in the petty cash book. At the end of the period the petty cashier balances his book. Then chief cashier pays him the amount which he spent, so that original amount of petty cash with which he started is restored.
Analytical petty cash book is ruled as follows: 

Now let me explain it to you with an example problem:

Example problem

Write out an Analytical Petty Cash Book from the following transactions:
2013
Aug 1 Issued a cheque of Rs 100 to petty cashier.
,, 2 Paid Electricity charges Rs 3.25
,, 4 Paid Telephone charges Rs 2.50
,, 8 paid for Printing Rs 3.75
,, 15 Paid for Stationery Rs 6
,, 20 Purchased Postcards Rs 3
Explanation: let me first explain the problem:
On Aug 1 when the amount is received from the head cashier it will be debited in receipt column, cheque is issued to petty cashier so debited as “To Balance B/d” and amount is entered into Receipt column
On Aug 2 all payments will be recorded on credit side in payment columns
Credited as "By Electricity” and amount is entered twice first in total payment column and second in electricity column.
On Aug 4 “By Telephone” and amount first entered in total payment column and then telephone column.
On Aug 8 “By Printing” amount in total payment column and in printing column.
On Aug 15 “By Stationery"and amount in total payment column and in stationery column.
On Aug 20 “By post card” and amount in total payment column and in post card column.

Here’s how our petty cash book will be like:

 Note: At the end of the month petty cash book receipt and payment column is totaled and balanced here total payments are balance c/d i.e. 18.50. so next month on 1 September this balance is b/d along with the reaming cash in hand i.e. 81.50 on receipt side to make it 100 again.
To analyzing the individual payments you have to just total individual expenses columns.

Other subsidiary books are as follows:

BILLS RECEIVABLES BOOK

Bills are of two types, Bill Receivable and Bills Payable. These arise in settlement of accounts between creditors and debtors. A bill is an order given by a creditor to his debtor to pay a certain sum of money to a specified person on specified date. Bill drawn by the trader and duly accepted by his debtors are called Bills Receivable. These are entered in a separate book called “Bill Receivable book”.

BILLS PAYABLES BOOK

Bills drawn by the creditors and accepted by trader is called Bill Payable, all the particulars of the bill are entered in the “Bill Payable book”





JOURNAL PROPER
All those transactions which cannot be recorded in the other subsidiary books are recorded in journal proper. Journal proper is just like recording in journal entries.
The following entries are recorded in journal proper.
1. Opening entries – Asset, liabilities &capital into new books
2. Rectification entries – Mistaken entries which are rectifying/correcting that entries
3. Adjustment entries – appreciate/depreciate on asset.
4. Closing entries – of trading A/c, P&L A/c
5. Other entries – personal use, loss of goods, goods sent on consignment etc.

We have already learned about opening entries, closing entries. I will explain rectification entries, depreciation, bills of exchange and consignment later.

For Now let me give you one☝️ (DIY) for your practice✍ let’s see how you will do! 👩‍🏫Well I have shared my knowledge with you let’s see did you gained that knowledge?🤷‍♀️

DO IT YOURSELF (DIY)

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