Question

What are the disadvantages of the petty cash book?

Answer 1

The disadvantages of the petty cash book are as follows:

1. Petty cash is prone to accounting errors due to a lack of any kind of documentation for tracking the cash.
2. There is a chance of theft of petty cash by employees and it will be difficult to track the source.

3. There is a possibility of overspending on petty cash if no limits are set for the purchase.

4. It is an inefficient and outdated method of accounting for small expenses, while it is good for small businesses, it may throw up issues with large companies.

Also read:

• Cash Book
• Cash Flow Statement
• Ledger in Accounting

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