Guidelines for maintaining petty cash
What is petty cash book?
Petty cash book is a supplementary cash book for day to day expenses in the office. If the petty cash book is not maintained these transactions would have been directly entered in the main cash book of the company.
Why petty cash book is maintained?
In the day to day administration of the office, a number of small expenses (called petty expenses) and incurred like getting soft drinks, snacks for visitors, staff welfare expenses, local conveyance, purchase of small items (articles) required on urgent basis. Daily passing vouchers and entering all these transaction in the cash book makes the cash book unwidaly with too many entries & making the cash book unwidely. Hence these entries are not directly entered into the cash book, but entered in the petty cash book, leaving only entries of bigger amounts being entered in the main cash book.
Benefits of maintaining petty cash
It facilitates through a quick procedure to draw small amounts to meet small expenditures or procure articles of petty value easily. It reduces work-load, individual vouchers are not passed for each items of expenditure incurred daily under petty cash. Only authorization slips will be obtained and kept in support of expenditures incurred. Categories wise totals for each head of petty expenditure will be made at the end of the month and vouchers will be passes for the month totals. It will thus reduce computer feeding of entries substantially for the main cash book maintained in the computer.
Procedure for maintaining petty cash
Petty cash book is a standardized record commonly used in all organization and printed register is avalibile in the shops, just like cash book, stock register or dak dispatch register. Either this can be purchases or a bank register improvised with columns may be used.
At the beginning of the month obtain an imprest advance to cover petty expenses of at least a week & take approval of competent authority for this limit e.g. at the head office to cover the needs of both offices i.e. head office and MDs office. Initially an advance of Rs. 5000/- may be obtained.
Classify routine expenditure incurred into suitable heads numbering 3 to 4 and keep extra head to cover misc. expenses that items cannot be classified under suitable heads.
Enter advance taken in the credit column of the petty cash book with date and also extend the balance in the balance column.
Small expenses up to Rs. 100/- per occasion may be incurred initially or oral sanction of competent officers (managers and above) and sanction (Pay orders) obtained on the vouchers, cash bill or special slips prepared from the passing officer subsequently. The amount spent may be entered in the appropriate column in the petty cash book and balance held after the expenditure extended in the balance column.
Expenditure voucher/slip up to Rs. 50/- per occasion and not exceeding Rs. 1000/- in a month can be passed by the section heads at the A.M levels and beyond this amount to passes by officers under manager cadre or above.
When the imprest advance taken in spent or and small balance left, submit expenditure spent with bills and slips issued by competent authority to maintain the full imprest amount of petty cash to accountant.
On the last day of the month, the expenditure column to be totaled and consolidated vouchers may be passed for each item of the different heads of expenditure listed above. The imprest advance will be updated in the process. In the beginning of the next month, fresh imprest advance to make up Rs. 5,000/- may be obtained.
Strict control on expenditure to be exercised by all handling petty cash
Expenditure can be incurred within the general policy of the company and wastage will not be allowed.
Expenditure which are of purely personal nature intended for the needs of any employee cannot be put through office cash.