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Objectives of Petty Cash Fund
Petty cash fund has many objectives, specially in making the payment of very small
expenditures easily and in order to lessen the burden of the accountant by keeping records
of a number of very small expenditures. The important objectives of petty cash fund are
as given below:
i. To overcome the inconvenience of issuing cheques for the small payments like
tea, coffee, bus fare, coolie charges, wages to casual labours, newspaper, postal
stamps, etc.
ii. To minimise the misuse of cash while making very small payments, by assigning
particular responsibility to a certain employee of the office.
iii. To reduce the accounting burden to the accountant or assistant accountant by
determining a separate duty and responsibility under a certain employee in the
office.
iv. To identify the separate position of the petty expenditures during various periods and
see the status of fund so that, a proper control can be made on the petty expenditure.
v. To facilitate the posting in ledger because all the expenditures of a certain period are
recorded in the journal voucher at once, at the time of re-imbursement and can be
posted into ledger at once.
Types of Petty Cash Fund
There are generally two types of petty cash fund: ordinary system and imprest system.
i. Ordinary System of Petty Cash Fund
Under this system, the petty cashier is given a certain sum of money for a certain
period, say a week, fortnight or month to meet all petty expenses. At the last of the certain
period i.e. the week, fortnight or month, the petty cashier produces the vouchers along
with the balance of amount, if any, before the head cashier or accountant. The head
cashier then verifies the vouchers and makes the entry of the total amount spent, into
his cash book. Then the petty cashier is given a certain necessary amount for the coming
period, which may be less than, equal to or more than the former fund. The same process
goes onward for the whole year. Since there’s a provision for fluctuating the fund for the
different periodical time, the control element is poor under this system.
ii. Imprest System of Petty Cash Fund
Under this system, the petty cashier is given a certain fixed sum of money in the
beginning of a certain period, say a week, fortnight or month or suggested to make
petty payments out of it. At the end of that certain period, the petty cashier produces the
vouchers before the main cashier. The main cashier then verifies the vouchers and enters
the total amount spent into his cash book and gives an amount to the petty cashier equal
to the amount spent by him/her so that, in the beginning of the coming period. He/she
will have the same amount in the fund as it was in the earlier period. This process goes
onward for the whole year and even sometimes for the series of years to come. The petty
cash fund is created, under this system, scientifically with the study of past experience,
firm’s policy and future probability so that, the fund so created will be sufficient to meet
the periodical expenses.

238 Aakar’s Office Practice and Accountancy - 10 Journal Voucher 239