Petty Cash Book is maintained for recording _______.

Question

Accepted Answer

The correct option is 2:
The fundamental purpose of maintaining a Petty Cash Book is to efficiently record all minor, frequent, and miscellaneous expenditures that are paid immediately out of a small, designated cash fund. This is done to relieve the main Cash Book, which handles all major receipts and payments, from the burden of recording a vast number of insignificant transactions. The Petty Cash Book acts as a book of original entry specifically for **petty expenses paid in cash**, such as postage, stationery, travel fares, and refreshments. The transactions must involve an actual outflow of physical cash from the fund, which is later reimbursed, especially under the Imprest System, ensuring precise control over these small but numerous payments.

The incorrect option is 1:
Petty incomes are receipts, and while they might occasionally be recorded in a Petty Cash Book, the book is not *maintained* for this purpose. Cash books primarily track movements, but the *petty* book’s function is almost exclusively to record the cash outflow for expenses. Significant incomes, whether petty or large, are meant to be deposited and recorded in the main Cash Book, which is the complete record of all cash and bank receipts. Therefore, while petty incomes may be a theoretical entry, they do not represent the core reason for the book's existence or maintenance.

The incorrect option is 3:
This option is incorrect because it mentions both "petty incomes received" and "petty expenses incurred." The inclusion of "petty incomes" makes it less accurate than Option 2, as the book's focus is on payments. More critically, accounting records, especially cash books, follow the cash basis for payments. The term "petty expenses **incurred**" is vague; a cash book must record expenses that are actually **paid** in cash, not those merely incurred (which could imply being on credit or yet to be paid).

The incorrect option is 4:
The phrase "Petty incomes and petty expenses" is too broad and lacks the necessary specificity required for double-entry accounting. Like Option 1 and 3, it incorrectly gives equal importance to 'petty incomes,' which is not the primary function of this subsidiary book. Most importantly, it fails to specify that the transaction must be a **cash payment**. An expense may be petty, but if it is paid via bank transfer or credit, it is not recorded in the Petty Cash Book.