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

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Balance of Petty Cash Book

Balance of the 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 a cash account is considered an Asset, a petty cash book which is a part of a 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 the petty cash book is computed by deducting Total expenditure from the 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  Particulars Amount
1st Aug Received cash from head cashier 5,000
4th Aug Paid Cartage expenses 300
8th Aug Telephone charges paid 200
10th Aug Paid Sundry expenses 500

 

Petty Cash Book of Alex & Max Co.

Petty Cash Book

 

Conclusion

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

 



 

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