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Chapter 4 · Lesson 2 of 4 · ⏱ 30 min

Petty Cash Book: handling small daily expenses

🎯 After this lesson you will be able to:
  • Explain why a separate petty cash book is kept and who keeps it
  • Understand the imprest system and calculate the reimbursement
  • Prepare an analytical (columnar) petty cash book and balance it
  • Post the petty cash book to the ledger through Petty Cash A/c and expense accounts

Every office spends small amounts every day: ₹40 auto fare, ₹90 courier, ₹150 tea for customers. If the main cashier writes each of these in the big cash book, it becomes fat and messy, and the cashier has no time for the big payments. So we give a fixed small fund to another person and let him keep a mini cash book. Today you will learn this petty cash book and the clever imprest system behind it. “Petty” simply means small.

1. Why a separate petty cash book?

At Sharma Traders, the head cashier Mr. Saxena handles lakhs every day: supplier cheques, UPI sales, salary. Earlier he also paid every ₹20 bus fare and ₹60 rickshaw charge. His cash book grew to 400 lines a month, and small vouchers kept getting lost. So the owner appointed Ritu as petty cashier, gave her ₹2,500 on the first of the month and said: “Pay all small expenses from this. At month end show me the bills, and I will give you back exactly what you spent.”

Petty cash book: a cash book kept by the petty cashier to record small, repetitive payments such as conveyance, cartage, postage and courier, stationery and refreshments.

2. The imprest system

Under the imprest system, a fixed amount called the imprest amount is given to the petty cashier at the start of a period (a week, a fortnight or a month). She makes small payments out of it. At the end of the period, the head cashier reimburses exactly the amount spent, so she again starts the next period with the full imprest.

Reimbursement = Amount spent during the period = Imprest − Cash left with the petty cashier

Imprest amount ₹3,000. During the month the petty cashier spends ₹2,640. How much will she receive at the start of next month, and what will she then hold?
  1. Cash left with her = 3,000 − 2,640 = ₹360.
  2. Reimbursement = amount spent = ₹2,640.
  3. New opening cash = 360 + 2,640 = ₹3,000 (the imprest is restored).
She receives ₹2,640 and again holds ₹3,000.

Students often write the reimbursement as the full imprest (₹3,000). Wrong! Only the amount spent is given back. The balance she already holds stays with her.

“Jitna kharcha, utna wapas.” Whatever she spent comes back, so the float is always full at the start of each period.

3. Format: the analytical petty cash book

Petty payments are of a few common types, so the payment side has one total column plus one column for each type of expense. This is called an analytical (columnar) petty cash book. The receipts side has only one amount column.

Amount received ₹DateParticularsV. No.Amount paid ₹Postage & CourierConveyanceStationeryCartageMisc.
 
  • V. No. = voucher number. Every payment must be backed by a bill or a petty cash voucher signed by the person who received the money.
  • Each payment is written twice on the payment side: once in “Amount paid” and once in its analysis column.
  • The last column, Miscellaneous, takes payments for which there is no separate column (tea, cleaning, small repairs). Some books add a “Remarks” column to describe them.
  • At the end of the period every column is totalled. The total of the analysis columns must equal the total of “Amount paid”. This is a built-in check.

4. Worked example

Ritu, petty cashier of Sharma Traders, received an imprest of ₹2,500 on 1 April 2026. Payments in April: Apr 2 Auto fare ₹80 · Apr 3 Speed post ₹120 · Apr 4 Pens and register ₹210 · Apr 6 Tea and snacks for customers ₹150 · Apr 8 Cartage on goods ₹180 · Apr 10 Courier ₹90 · Apr 12 Photocopies ₹65 · Apr 15 Bus fare ₹40 · Apr 17 Rickshaw for delivering goods ₹60 · Apr 19 Printer paper ₹240 · Apr 21 Cleaning material ₹130 · Apr 23 Registered post ₹75 · Apr 25 Metro fare ₹55 · Apr 27 Unloading charges ₹100 · Apr 29 Tea for staff meeting ₹95 · Apr 30 Taxi fare ₹210. Prepare the analytical petty cash book.
  1. Classify: Postage & Courier = speed post, courier, registered post. Conveyance = auto, bus, metro, taxi (travel of staff). Stationery = pens, photocopies, printer paper. Cartage = carrying/unloading goods (cartage, rickshaw for delivery, unloading). Misc. = tea, cleaning.
  2. Column totals: Postage 120 + 90 + 75 = 285; Conveyance 80 + 40 + 55 + 210 = 385; Stationery 210 + 65 + 240 = 515; Cartage 180 + 60 + 100 = 340; Misc. 150 + 130 + 95 = 375.
  3. Check: 285 + 385 + 515 + 340 + 375 = 1,900 = total of “Amount paid”. ✔
  4. Balance = 2,500 − 1,900 = ₹600 (By Balance c/d). On May 1: Balance b/d ₹600 and reimbursement ₹1,900 received.
Received ₹DateParticularsV. No.Paid ₹Postage & CourierConveyanceStationeryCartageMisc.
2,5002026
Apr 1		To Cash A/c (imprest)
Apr 2By Auto fare18080
Apr 3By Speed post2120120
Apr 4By Pens and register3210210
Apr 6By Tea for customers4150150
Apr 8By Cartage5180180
Apr 10By Courier69090
Apr 12By Photocopies76565
Apr 15By Bus fare84040
Apr 17By Rickshaw (goods delivery)96060
Apr 19By Printer paper10240240
Apr 21By Cleaning material11130130
Apr 23By Registered post127575
Apr 25By Metro fare135555
Apr 27By Unloading charges14100100
Apr 29By Tea for staff meeting159595
Apr 30By Taxi fare16210210
Total1,900285385515340375
Apr 30By Balance c/d600
2,5002,500
600May 1To Balance b/d
1,900May 1To Cash A/c (reimbursement)
Amount spent ₹1,900; balance with petty cashier ₹600; reimbursement on May 1 ₹1,900.

Conveyance vs cartage: conveyance is travel of people (staff going to the bank or post office). Cartage is carrying goods. A rickshaw that carries a parcel of goods is cartage, not conveyance.

Imprest ₹2,000 on 1 April 2026. Payments: postage ₹150, courier ₹60, auto fare ₹90, taxi fare ₹120, bus fare ₹45, stationery ₹230, tea ₹85, cleaning ₹110, speed post ₹70. What is the balance with the petty cashier at the end of the month (in ₹)?

Add all payments, then subtract from the imprest.
Total spent = 150 + 60 + 90 + 120 + 45 + 230 + 85 + 110 + 70 = 960. Balance = 2,000 − 960 = ₹1,040. (The reimbursement will be ₹960.)

In the question above, what is the total of the “Postage & Courier” column (in ₹)?

Postage, courier and speed post all go in this column.
150 + 60 + 70 = ₹280.

5. Posting the petty cash book to the ledger

The petty cash book is not the ledger. So a Petty Cash Account is opened in the ledger, and entries are made in three steps:

  1. When the imprest is given (from the main cash book): Petty Cash A/c is debited, Cash (or Bank) A/c is credited.
  2. At the end of the period: each expense account is debited with its column total, and Petty Cash A/c is credited with the total spent, written as “By Sundries as per Petty Cash Book”.
  3. When reimbursed: Petty Cash A/c is debited, Cash (or Bank) A/c is credited with the amount spent.

For Sharma Traders, the journal entries look like this:

DateParticularsL.F.Dr (₹)Cr (₹)
2026
Apr 1		Petty Cash A/c Dr.2,500
To Cash A/c2,500
(Being imprest given to the petty cashier)
Apr 30Postage & Courier A/c Dr.285
Conveyance A/c Dr.385
Stationery A/c Dr.515
Cartage A/c Dr.340
Miscellaneous Expenses A/c Dr.375
To Petty Cash A/c1,900
(Being petty expenses for April posted from the petty cash book)
May 1Petty Cash A/c Dr.1,900
To Cash A/c1,900
(Being petty cash reimbursed)
Total6,3006,300
Dr.Petty Cash AccountCr.
DateParticularsJ.F.₹DateParticularsJ.F.₹
2026
Apr 1		To Cash A/c2,5002026
Apr 30		By Sundries as per Petty Cash Book1,900
Apr 30By Balance c/d600
2,5002,500
May 1To Balance b/d600
May 1To Cash A/c1,900

The balance of Petty Cash A/c (₹600 before reimbursement) is the actual cash with the petty cashier. Each expense account gets only one posting per period (its column total), which saves a lot of posting work.

In some businesses the petty cash is run through the main cash book itself, and no separate petty cash book is kept. Then the column totals are posted from the main cash book.

At the end of the week, a petty cash book shows column totals: Postage ₹140, Conveyance ₹215, Stationery ₹180. Pass the posting entry for these expenses. (Three debits, one credit.)

Expenses increase. The petty cash fund decreased because it paid them.
Each expense account is debited with its column total and Petty Cash A/c is credited with the total ₹535.
DateParticularsL.F.Dr (₹)Cr (₹)
Postage A/c Dr.140
Conveyance A/c Dr.215
Stationery A/c Dr.180
To Petty Cash A/c535
(Being petty expenses of the week posted)

The head cashier reimburses the petty cashier ₹1,460 by cheque. Pass the journal entry.

The petty cash fund goes up; the payment is made by cheque.
Petty cash (asset) increases → debit Petty Cash A/c. Payment by cheque reduces bank → credit Bank A/c.
DateParticularsL.F.Dr (₹)Cr (₹)
Petty Cash A/c Dr.1,460
To Bank A/c1,460
(Being petty cash reimbursed by cheque)

6. Advantages of a petty cash book

  1. Saves the head cashier’s time and effort: he deals only with large payments and can do that work carefully.
  2. Better control over cash: the petty cashier can never spend more than the imprest, and every rupee must be supported by a voucher before reimbursement. This makes fraud and misuse difficult.
  3. Convenient recording: the main cash book stays short and useful. Following the idea of materiality, tiny details need not crowd the main books.
  4. Less posting work: only column totals are posted to the ledger, not every ₹20 item.

Many offices today keep petty cash in a prepaid card or a small UPI wallet instead of a cash box. The idea is the same imprest system: a fixed limit, bills for every payment, and a top-up equal to the amount spent.

Imprest ₹4,000. At the end of the month the petty cashier has ₹620 left. The amount reimbursed to her will be:
  • ₹4,000
  • ₹4,620
  • ₹3,380
  • ₹620
Reimbursement = amount spent = 4,000 − 620 = ₹3,380. After it, she again holds ₹4,000.
In the ledger, expense accounts are debited from the petty cash book with:
  • the periodic total of each analysis column
  • each individual voucher
  • the imprest amount
  • the closing balance of petty cash
That is the whole point of analysis columns: one posting per expense head per period.

7. Exam tips

  • Choose 4–5 sensible analysis columns and always keep a “Miscellaneous” column.
  • Show the total row, then “Balance c/d”, then equal totals of receipts and payments, then “Balance b/d” and the reimbursement on the first day of the next period.
  • Check that the analysis column totals add up to the “Amount paid” total. If asked, pass the journal entries as in Section 5.

📌 Points to remember (Quick Revision)

  • Petty cash book = mini cash book for small, repetitive payments, kept by the petty cashier.
  • Imprest system: a fixed float is given; at the end of the period the amount spent is reimbursed, so the float is full again.
  • Reimbursement = Imprest − Balance in hand = Total spent.
  • Analytical petty cash book: one “Amount paid” column plus one column per expense type and a Miscellaneous column; column totals must equal total paid.
  • Posting: Petty Cash A/c Dr. (imprest and reimbursement); expense accounts Dr. with column totals, Petty Cash A/c Cr. “By Sundries as per Petty Cash Book”.
  • Advantages: saves the head cashier’s time, controls cash, keeps the main cash book short, reduces posting.

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