Organizations pay a huge amount of money for proper staff maintenance and other organizational factors. Most large and small businesses now calculate and record their expenses in computer systems and track them via the internet. To improve financial management, the organization allocates money differently depending on the reason for the expense.
Big expenses like salary transfers, investments in the workplace, or the purchase of large machines come under general cash transactions. But small transactions like money spent on stationery, morning and evening snacks, travel expenses, and postage facilities come under petty cash. To maintain these transactions, companies use cash book systems. One can visit blog.happay.com to learn about the details of petty cash books.
As the amount of petty cash is small, many companies refrain from using internet software for these minor expenses. To record the details of petty cash usage, it is best to use a ledger book. The following points describe the different types of book systems and how to use them:
Ordinary Petty Cash Book System
Petty cash is allocated for minor organization expenses like travel, food, and stationery. As these expenses happen regularly, it is best to manage them separately in a book. For large expenses, the responsible person is the chief cashier, who maintains and records all the expenses. Similarly, the person responsible for petty cash management is a petty cash cashier who maintains the expenses in bookkeeping systems.
As the large and small regular expenses are widely different, the organization prefers to track the expense separately with the help of different cashiers. The very first book system for petty cash is the ordinary system. In this system, the cashier is given a round-off amount of money from which the payments are made for the expenses of travel, food, and newspaper supplies.
In this system, the cashier collects the receipt for every expense made on the bill.
For example, the cashier requires utility, travel, food, and other transactional bills from stores. These bills are then submitted to the chief cashier, along with all the details of the expenses. These details greatly aid in the reimbursement of the staff. It can be a challenging task for the organization to track the personal expenses of each employee, which is why petty book systems are used.
The ordinary petty cash systems are very easy to use, as one has to fill in the total amount provided by the organization and then fill in the expenses correctly. This booking system has a special table format with multiple expense details columns. With the help of different columns, it becomes easy for the chief cashier to analyze the petty cash expenses.
Fixed Petty Cash Book System
The biggest benefit of a petty cash book system is that the organization can manage minor expenses with the help of a simple book system that is very easy to maintain. Apart from that, the companies can hire someone other than professionals to manage this book as it requires basic accounting knowledge to perform the functions. As the chief cashier performs the major tracking and analysis, the petty cash cashier has few responsibilities.
The second type of petty cash book system is the fixed one, which varies from the ordinary one in terms of the period. In this system, the money provided to the cashier for minor expenses is given for a fixed period. The organization gives a fixed amount of money for the expenses; after exhausting the expenses, more money is transferred for minor transactions. The cashier has to use that fixed amount for the given period.
The new amount is only provided when the petty cash cashier submits all the details of the former budget. The cycle continues for every period. One can use the columnar book format for managing this system, in which different columns are given. The first column specifies the fixed amount provided for minor transactions. The next column is the date of the transaction.
The final two columns contain two pieces of information: the reason for the expense and the payment amount. In a nutshell, it is very easy to use this system as it has very few columns, and the cashier has to fill them in according to the expense date. After using the given amount, the details of the transactions are submitted to the chief cashier for further analysis.
Imprest Petty Cash Book System
The imprest system is the third type of book system used for managing petty expenses. Most organizations prefer this type of system as it is more efficient than other systems. In the imprest system, the chief cashier estimates a certain amount of money for a particular period, for example, for a week or a month. In this estimated amount, the cashier includes all the expenses that might happen in that time.
That estimated amount is provided to the cashier responsible for the minor payments. It is a method in which money is provided in advance before making any expense. The biggest advantage of using the imprest system is that it helps reduce minor expenses as the organization tries to match the payments with the estimates and the reason for the expense. Most of the amount is used for the purpose that is already mentioned in the estimate.
This is the most efficient method and requires more knowledge than the other two systems as one must spend money on reasonable activities. This makes the tracking process much easier, as it also helps with easy reimbursement to the employees. One can use the imprest system in an analytical manner in which each column is devoted to a certain type of expense. In this case, it becomes easy to calculate all the expenses done in the given time period.
These systems play a very important role in managing an organization’s finances. It is common for businesses to waste the majority of their valuable resources on irrelevant activities, resulting in a significant financial burden for the organization. Petty book systems allow you to easily track and record minor expenses while controlling the irrelevant ones.
One can use any of the three systems, as they are easy to use. The cashiers bear the most responsibility because they determine the amount of money and must provide payment details. As receipts are also collected in these systems, it makes the whole process more transparent and credible.