What is a petty cash book and what is its purpose?

• A. A petty cash book records all major purchases.
• B. A petty cash book records small cash payments funded by a fixed imprest amount, simplifying routine cash outlays.
• C. A petty cash book records only bank transfers.
• D. A petty cash book records employee payroll.

Answer: (B)

A petty cash book is a small, dedicated record used to track minor cash payments made from a petty cash float. The purpose is to control and simplify routine, everyday cash outlays. A fixed imprest amount is kept on hand; as small payments (like stamps, postage, or small office supplies) are made, they are recorded in the petty cash book with corresponding receipts or vouchers. When the fund nears depletion, it is replenished back to the fixed amount, so the total cash on hand remains constant and a clear trail of these small expenses is maintained. This separation helps keep the main cash book cleaner and makes reconciliations quicker. It isn’t used for major purchases, bank transfers, or payroll, which are recorded in other parts of the accounting system.