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Angie

The balance of petty cash book is an asset or income?

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1 Answer

  1. This answer was edited.

    Balance of Petty Cash Book-

    The balance of petty cash book is an asset and not income. The logic behind the answer is that petty cash book is one of the types of cash book and petty cash book records expenses and incomes which is similar to cash book. Since cash account is considered as an Asset, petty cash book which is a part of cash book is also an asset.

    The balance of petty cash book is never closed and their balances are carried forward to the next accounting period which is considered as one of the most significant qualities of an asset whereas Income doesn’t have any opening balance and their balances get closed at the end of every accounting year.

    Petty cash book is placed under the head current asset in the balance sheet. The Closing Balance of petty cash book is computed by deducting Total expenditure from Total cash receipt (as received from the head cashier).

    To make the above explanation and logic easy. I would like to add a practical example for clear understanding.

    Example Problem

    Prepare Petty Cash Book of Alex & Max Co. from the following information as provided below

    Date ParticularsAmount
    1st AugReceived cash from head cashier5,000
    4th AugPaid Cartage expenses300
    8th AugTelephone charges paid200
    10th AugPaid Sundry expenses500

      Petty Cash Book of Alex & Max Co.

    Petty Cash Book

    Conclusion

    I would like to conclude my answer by stating that the balance of petty cash book is an asset and not income.

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