Cash Book vs. Petty Cash Book

Attribute	Cash Book	Petty Cash Book
Definition	A book of original entry in which transactions involving cash are recorded	A book used to record small payments of cash
Frequency of Recording	Regularly, usually daily or weekly	As and when petty cash transactions occur
Size of Transactions	Can involve large transactions	Usually involves small transactions
Usage	Used for all cash transactions	Used for small, miscellaneous cash expenses

Introduction

Both cash book and petty cash book are important financial records used by businesses to track their cash transactions. While they serve similar purposes, there are key differences between the two that make them unique in their own ways.

Definition

A cash book is a ledger account used to record all cash transactions, including both receipts and payments, in a chronological order. It serves as a primary book of accounts for cash transactions in a business. On the other hand, a petty cash book is a subsidiary book used to record small, day-to-day cash expenses that are not suitable for recording in the main cash book.

Scope

The cash book typically covers all cash transactions, regardless of the amount, made by the business. It includes both regular expenses and income. In contrast, the petty cash book is limited to small expenses that do not exceed a certain threshold set by the business. These expenses are usually for items like office supplies, postage, or minor repairs.

Format

The cash book is usually divided into two sides - the debit side for cash receipts and the credit side for cash payments. Each transaction is recorded with a date, description, and amount. The petty cash book, on the other hand, may have multiple columns for different types of expenses, such as postage, office supplies, or miscellaneous expenses. It also includes a column for the total amount of cash on hand.

Frequency

Cash book entries are made on a daily basis to ensure accurate and up-to-date records of cash transactions. This helps in monitoring cash flow and maintaining financial control. In contrast, petty cash book entries may be made less frequently, such as weekly or monthly, depending on the volume of small expenses incurred by the business.

Control

Since the cash book covers all cash transactions, it is an important tool for internal control and monitoring of cash balances. It helps in detecting errors, fraud, or discrepancies in cash transactions. The petty cash book, on the other hand, is used to control and monitor small expenses and ensure that they are properly authorized and accounted for.

Reconciliation

At the end of each accounting period, the cash book is reconciled with the bank statement to ensure that all cash transactions are accurately recorded. Any differences are investigated and resolved. The petty cash book, on the other hand, is reconciled with the actual cash on hand to ensure that all expenses are properly accounted for and supported by receipts.

Conclusion

In conclusion, both cash book and petty cash book are essential tools for managing cash transactions in a business. While the cash book covers all cash transactions, the petty cash book focuses on small, day-to-day expenses. By understanding the attributes of each, businesses can maintain accurate financial records and ensure proper control over their cash flow.