Learning Materials For Accounting, Management , Finance And Economics.

Wednesday, June 23, 2010

Concept And Meaning Of Petty Cash Fund And System Of Petty Cash

Petty cash fund is a certain amount of fund which is kept aside for paying all small or petty expenses, like bus fare, cartage, postage stamp etc. that cannot be paid particularly through cheque. The amount of fund is availed to a separate staff who is known as petty cashier by debiting petty cash account and crediting cash account.

System Of Petty Cash

There are two types of petty cash. One is ordinary and another is imprest system as explained below:

1. Ordinary System Of Petty Cash

Under it, the petty cashier is given a certain amount of cash for meeting petty expenses. When he spends nearly the whole amount , he submits the account of expenses along with surplus amount. If necessary, he will be given another sum to meet petty expenses of next period.

2. Imprest System Of Petty Cash

It is more popular system of petty cash. Under it, the petty cashier is given certain amount of cash usually at the beginning of a month. At the end of the period, the petty cashier submits the accounts of expenses keeping surplus amount himself. Now, the head cashier gives to the petty cashier another sum for the reimbursement of the fund which equals the amount spent by him during the period. Thus, every time petty cashier begins the next period with the same amount of float. Note that the fund is reimbursed by debiting individual expense account and crediting petty cash account. The system in which petty cash fund is reimbursed for the petty expenses incurred is called imprest system of petty cash.