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Thursday, May 17, 2012

Types of Petty Cash Book

Simple Petty Cash Book
Simple petty cash book is same as single cash book where only one amount column is maintained in each side of such cash book. Amount received from head cashier is entered on the debit side of cash book and all the petty payments made by petty cashier are recorded in  credit side. Finally, the balance amount is found out.

Analytical Petty Cash Book
Under this system of cash book, a separate column is provided for each type of petty expense in the credit side of cash book. However debit side columns are same as simple column cash book. Number of columns of such petty expenses depends upon the volume of petty transactions. When there is large number of transactions, only most common petty expenses are assembled in the 'miscellaneous expenses' column.

Petty Cash Book

In an organization, there are many petty expenses to be paid in small amount. Taxi fare, cartage, postage and stamps, stationery etc. are some petty expenses for which it is not practicable to issue cheques. On the other hand, it will become very bulky if all these payments are entered in the cash book. Therefore, a petty cashier is given a certain sum of money to make such small payments and s/he enters them in a petty cash book.

Advantages of Petty Cash Book:
  1. Main cashier can utilize his/her time to important work since the petty expenses are recorded by petty cashier.
  2. It reduces the use of cheques and also avoids the inconvenience of issuing cheques for small payments.
  3. There are lesser chances of frauds and errors of all petty expenses due to the regular checking of petty cash book by head cashier.
Imprest System of Petty Cash Book
The work 'imprest' means 'advance amount' given to certain person to make petty payments. It is a system of petty cash book where a person (petty cashier) is given a fixed amount in the beginning of the month or week. He is supposed to make all small payments of petty expenses. At the end of the period say month or week, the vouchers are checked by head cashier and petty cashier is paid as much as he has spent during the period so that he will have the same amount as he had at the beginning of the first period.

Friday, July 15, 2011

Usual Terms Relating to Purchase Book

  1. Invoice: Purchase book is prepared on the basis of a statement which is called as an invoice. It consists the details of quantities and prices of materials or goods purchased. It also shows the discount allowed and the terms and conditions of payment. An invoice is written or printed document sent by seller to buyer which contains the following components.
  • Quantity of goods.
  • Rate per unit and the total amount of goods.
  • Quality, brand and size of goods.
  • Amount of discount allowed.
  • Means and mode of transport etc.
2. Trade Discount: Trade discount is a deduction allowed from the invoice or list price of the goods. It is deducted from the invoice and allowed by the supplier to the retailers if they purchase goods more than a certain quantity or certain amount. A certain percentage of gross amount of purchases is considered as trade discount.

Purchase Book

Purchase book is also known as Purchase Journal or Bought Book or Purchase Day Book or Invoice Book. It is used for recording all credit purchases of goods, meant for resale. Cash purchases are not recorded in this book. Cash purchases are entered in the cash book. Moreover, credit purchase of assets for the business are also not entered in this book. For instance, purchase of a motorbike on credit by a cloth-seller is not recorded in the purchase book whereas the same credit purchase by a motorbike dealer must be recorded in his purchase book.

Features of Purchase Book:
  1. Only credit purchase of goods are recorded.
  2. Those goods purchased on credit must be for re-sale.
  3. Cash purchases are not recorded.
  4. Asset purchases are also not recorded.
Importance of Purchase Book:
  1. To know the total credit purchase of goods.
  2. To know goods purchased from various supplier and the amount due to them.
  3. To make easier for the preparation of trading account.
  4. To save time and money for recording it.

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