Petty Cash Fund

The petty cash fund is an amount that is maintained by government office for making payments of small expenditures like refreshment, newspapers, postal stamp, taxi fare etc. These types of expenditures occur in government offices frequently. For making payment of such small amount of expenditures in cash, a fund is created by the office, which is known as petty cash fund. All the petty expenses are paid through this fund. These expenses are recorded in a separate book systematically which is known as petty cash book. It has been designed under the format of AGF No. 22.

At the beginning of the fiscal year, the petty cash fund is created. At the end of each month, the petty cash fund is reimbursed. At the end of the fiscal year, the petty cash fund is closed by depositing the surplus amount in the bank.

Objectives

The main objectives of petty cash fund are as follows: -

1. To facilitate for paying petty expenses
   The petty cash fund helps to pay petty expenses directly in cash. It facilitates the accountant to pay petty expenses easily. It removes the difficulties for issuing many cheques for small expenditures.
   
   
2. To save valuable time
   The office should pay a small amount of expenditures to the concerned parties immediately. It is impracticable for paying small expenditures through cheque. It takes a long time to issue and encash the cheque. Hence, the petty cash fund saves valuable time by paying small expenditures in cash.
   
   

3. 

   To facilitate for keeping records
   The petty cash fund helps to record the small expenditures with greater ease. It is difficult to maintain journal voucher and ledger for small expenditures. The petty cash fund removes this difficulty maintaining a single journal voucher at a time.
   
   
4. To facilitate for posting
   All the expenditures are recorded in the journal voucher at a time while reimbursing the fund. It facilitates for posting a large number of petty transactions at once in the bank cash book and budget sheet.
   
   
5. To facilitate for controlling petty expenses:
   It makes possible for making a comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively.
   
   
6. To reduce the burden of concerned authority:
   It reduces the burden of concerned authority as he is not required to handle petty transactions and hence he will have enough time to manage and control major cash transactions more effectively.

Importance and Advantages

The importance and advantages of petty cash fund are as follows: -

1. It facilitates to pay expenses in cash immediately.
2. It helps to make a record of all petty payments systematically.
3. It facilitates for posting petty transactions in the bank cash book and budget sheet.
4. It facilitates for controlling the embezzlement of cash in an effective manner.
5. It helps to supply information regarding petty payments made on different heads more easily and quickly due to their systematic record in the petty cash book.
6. It helps in timely reporting and checking of petty expenses. Thus, the errors, if any, can be located and rectified easily.