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Type of Account
“Petty cash” is an asset and is shown under the category of current assets in the balance sheet. Since it is an asset, the normal balance of petty cash will show a positive balance (or) debit balance. According to the modern rules whenever there is an increase in the value of the asset then the particular asset account is being debited and vice-versa.
Modern Accounting Approach
Received 250 from the head cashier for all petty cash expenses. Journalise the following transaction.
|Accounts Involved||L.F.||Amount||Nature of Account||Accounting Rule|
|Petty cash a/c||250||Asset||Debit– The Increase in Asset|
|Cash a/c||250||Asset||Credit– The Decrease in Asset|
The amount of petty cash will increase when it is debited with additional cash and will decrease when expenses are incurred. Petty-cash book follows the imprest system of accounting. The normal opening balance of cash will be placed on the Left-Hand Side under the cash receipts column. Total payments are shown on the Right Hand Side of the petty cash book.
Prepare a Petty Cash Book on the imprest system from the following data as provided below-
|Jan 1||Received cash from head cashier||450|
|3||Paid for carriage||50|
|4||Paid for bus fare||50|
|6||Refreshments to customers||40|
Petty Cash Book