Are you having trouble keeping track of small expenses in your business? Do you find it difficult to manage petty cash transactions and keep them organized? Or are you confused how to apply the money measure concept to petty cash? Well, fear not! A basic tutorial to petty cash book can be the solution to all your problems. In this blog post, we will guide you through everything you need to know about petty cash books – their types, uses, and benefits. So buckle up and get ready to learn how a simple notebook can make a big difference in managing your finances.
What is a petty cash book?
A petty cash book is a small notebook that businesses use to record and track their minor expenses. It’s a simple yet effective tool for managing small transactions, such as office supplies or travel costs, without the need for complex accounting software.
The purpose of a petty cash book is to keep an accurate record of all the money spent on these minor expenses. By using this book, you can easily monitor your business’ spending habits and identify any areas where you may be overspending.
Typically, petty cash books are maintained by one person in the company who is responsible for handling these small transactions. This person will be given a certain amount of money from the business owner or manager at regular intervals and will be required to keep receipts and records of every transaction made.
With proper maintenance of your petty cash book, it becomes easier to manage financial audits since everything about your business’s minor expenditures would have been accounted for properly.
What are the types of petty cash books?
There are two main types of petty cash books: columnar and analytical. Each type has its unique features and is used for different purposes.
Both types of petty cash books offer benefits depending on what your business requires in terms of tracking expenses. Based on their individual features you need to choose the ideal type for you:
1. Columnar petty cash book
A columnar petty cash book is used for recording small transactions. It has columns to record different expenses like office supplies, food and beverages, transportation, etc.
This type of book helps in keeping track of all the expenses made from a petty cash fund and ensures that it does not run out without proper documentation. The columnar format also makes it easy to categorize expenses and analyze them later.
Typically, a columnar petty cash book has spaces for the date, description of the expense, the amount spent, the signature or initials of the person who approved the expense and the balance remaining in the fund after each transaction.
Using a columnar petty cash book can help businesses maintain accurate records of their spending which can be useful when preparing financial statements or tax returns. It’s important to keep this type of book up-to-date by reconciling it regularly with actual funds on hand.
Using a columnar petty cash book is an effective way to manage small transactions efficiently while maintaining accurate records.
2. Analytical petty cash book
Analytical Petty Cash Books provides more detailed information about how the money was spent making it ideal for businesses that need a deeper understanding of their spending patterns. It enables businesses to analyze which departments are spending more than others and where cost-cutting measures can be applied. These provide more detailed information about each expense. They include columns not only for the category of expense but also for details such as date, description of the expenditure, the amount spent and so on. Analytical books are useful when a business needs to keep track of small expenses from various departments or employees.