Petty Cash Book

Last Updated On -16 May 2025

Any company needs good financial management, and the Petty Cash Book is one of the sometimes disregarded yet vital instruments available in this process. It is absolutely important for tracking and managing daily, minor cash outlays inside a company. Although the amounts might be small, over time these transactions can build up greatly and need careful management with openness.

This blog covers all you need to know about the Petty Cash Book—its definition, characteristics, varieties, benefits, and sensible application.

Define Petty Cash Book

Small, daily expenses include postage, stationery, minor travel expenses, snacks, or minor repairs are entered into a Petty Cash Book, a specialised accounting book. These are expenses not covered by cheque or more substantial amounts of cash.

Businesses have a petty cash system to simplify accounting and cut clerical work rather than channelling such expenses through the main cash book. Later on, the entire petty expenses show up in pertinent heads on the main ledger.

Key Features of a Petty Cash Book

Important Characteristics of a Petty Cash Book Notes Little expenses:

The petty cash book records only tiny, periodic company expenses.
Petty Cashier: Designed to handle and document these transactions, a designated person usually known as the petty cashier maintains maintained by Petty Cashier
Most petty cash books run under the imprest method, in which case a set sum is provided to the petty cashier at the start of a period and expenses are routinely refunded.
Expenses are sometimes separated into several columns depending on their type for simple analysis (e.g., postal, transportation, phone).
Reduces load on main cash book: This guarantees that the main cash book stays neat and concentrated on important transactions, therefore reducing load on it.

Key Types of Petty Cash Books

Depending on the recording method, petty cash books might either be of two kinds:

Simple Petty Cash Book: Only the date, quantity, and specifics of the minor expenses are chronologically recorded in this style. Small firms with few transactions would find it more appropriate.
Columnar Based Analytical Petty Cash Book: Particularly in bigger companies, this is the most often used structure. It features separate columns for several kinds of spending including: Postal Service, stationery, pay, variety, getting about, and refreshers.

This structure facilitates the preparation of end-of-period expense reports by helping to better classify and analyse small expenses.

How does the Imprest System Work?

Under the imprest system, the petty cashier gets a set sum—say ₹ 5,000. Small expenses cover this sum. The petty cashier turns in the vouchers at the end of the month (or any set period) and gets reimbursed exactly for the amount spent, therefore returning the fund to its original level of imprest.

This system guarantees responsibility, openness, and sensible use of petty cash.

Advantages of Using a Petty Cash Book

Using a petty cash book has advantages in terms of efficient record-keeping since it enables one to document little expenses without complicating the main cash book.
Reduces the requirement for higher-level permission and documentation for very minor transactions helps to save time.
Since every expense is recorded with a voucher or receipt, audit and monitoring becomes simpler.
Organising expenses helps companies to identify areas where most modest cash withdrawals are happening.
Reduces Manual Errors: Periodic inspection and specialised columns help to narrow the field of manual mistakes.

Example for Petty Cash Book

Starting the month with ₹3,000, a marketing company gives their receptionist ₹3,000 to fulfil daily needs such as notepads, local courier service payments, and snack purchases for visitors.

Near the conclusion of the month:

Courier = ₹ 900
Stationery = ₹1,200
Refreshments come at ₹600.
Miscellaneous equal ₹300.
Overall: ₹3,000.

The ₹3,000 is repaid if the receptionist shows vouchers for all expenses, therefore restoring the imprest value.

Key Tip While Keeping a Petty Cash Book

Verify correct documents and authorisation for every small expenditure always. Petty cash vouchers or proper receipts should support even little purchases. This guarantees that the system is not abused and helps to stop internal audit fraud or disparities.

Did you know?

Originally developed years ago in commercial towns where a certain cash float was kept to pay ship captains and crew for minor necessities at port, the idea of the imprest system originated. Modern accounting for companies progressively adopted this effective system.

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Frequently Asked Questions (FAQs)

In what ways may a Petty Cash Book differ from a Cash Book?

While the Petty Cash Book is used especially for tracking little, daily expenses, the Cash Book documents all significant business cash and bank transactions.

Are digital technologies able to replace the Petty Cash Book?

Indeed, many companies today use digital accounting systems with petty cash capabilities, but the fundamental ideas—categorization, vouchers, and imprest reimbursement—remain the same.