Petty Cash Book : Definition, Types, Formats & Operations

Small business expenses happen every day. A courier needs to be paid, stationery runs out, or an employee needs money for a minor office purchase. Processing every such expense through the regular payment or reimbursement process can take more effort than the expense itself.

Petty cash gives businesses a way to handle these smaller payments. But when several expenses are made over days or weeks, keeping track of who spent what and why becomes important.

A petty cash book helps businesses maintain an organised record of these transactions. In this blog, we will see how a petty cash book works, its types and formats, how entries are recorded, and how businesses can maintain it correctly.

What is A Petty Cash Book?

A petty cash book is a book of accounts used to record small and frequent business expenses. These expenses are usually handled by a petty cashier who receives a certain amount of money from the main cashier and uses it to pay approved day-to-day expenses.

For example it may be used for:

• Postage and courier charges
• Stationery
• Local conveyance
• Office refreshments
• Minor repairs
• Other small office expenses

A separate petty cash book reduces the number of small transactions recorded in the main cash book and makes such expenses easier to account for.

What Details Are Recorded in a Petty Cash Book?

A petty cash book generally contains the following details:

• Date of transaction
• Particulars of the expense
• Voucher or receipt number
• Amount received
• Amount paid
• Expense category
• Balance available

The exact format may differ depending on the type of petty cash book used by the business.

What Are The Systems For Maintaining Petty Cash?

Businesses can follow different systems to provide money to the petty cashier. The three commonly discussed methods are the ordinary system, fixed system and imprest system.

1. Ordinary System

Under the ordinary system, the petty cashier receives a lump sum for small expenses.

Once the amount is spent or falls short, the petty cashier submits the expense details and supporting receipts to the main cashier. Another amount is then provided for future expenses.

2. Fixed System

Under the fixed system, a fixed amount is given to the petty cashier for a particular period.

For example, a business may provide ₹5,000 every month for petty expenses. At the end of the month, the petty cashier submits the expense account and another fixed amount is provided for the next period.

3. Imprest System

Under the imprest system, a fixed petty cash amount is maintained.

Suppose a business fixes its petty cash fund at ₹5,000. If ₹1,700 is spent during the period, the petty cashier receives ₹1,700 after submitting the expense details.

The petty cash balance therefore returns to ₹5,000.

For example:

The imprest system is commonly used because the amount held as petty cash is fixed and expenses can be checked before the spent amount is replenished.

What Are The Types Of Petty Cash Books?

Petty cash books are generally classified into two types:

1. Simple petty cash book
2. Analytical petty cash book

1. Simple Petty Cash Book

A simple petty cash book records the money received by the petty cashier and the payments made from it.

It works in a similar way to a basic cash book. Cash received is recorded on the receipt side while petty expenses are recorded on the payment side.

A simple petty cash book is suitable when the number of petty transactions is limited and the business does not require a separate column for every type of expense.

Simple Petty Cash Book Format

In this example, the petty cashier receives ₹5,000 and spends ₹1,700. The closing balance is ₹3,300.

2. Analytical Petty Cash Book

An analytical petty cash book records petty expenses under separate columns based on the nature of the expense.

For example, separate columns can be created for:

• Postage
• Stationery
• Travel
• Refreshments
• Repairs
• Miscellaneous expenses

Whenever an expense is recorded in the total payment column the same amount is also entered under the relevant expense column.

This makes it easier to calculate the total amount spent under each expense category at the end of the period.

Analytical Petty Cash Book Format

The total of all expense columns should equal the total payments recorded.

Simple Petty Cash Book Vs Analytical Petty Cash Book

How Does A Petty Cash Fund Work?

The operation of petty cash can broadly be divided into three stages.

1. Creating The Petty Cash Fund

The business decides how much money should be kept for small expenses and appoints a petty cashier to manage it. The amount is then transferred or handed over to the petty cashier.

For example, if the approved petty cash fund is ₹5,000, the business provides ₹5,000 to the petty cashier at the beginning of the period.

2. Making Petty Cash Payments

The petty cashier uses the fund to pay small expenses allowed under the company's policy.

Every payment should be recorded in the petty cash book. Bills, invoices, receipts, or petty cash vouchers should also be collected wherever applicable.

Businesses can also set rules such as:

• Maximum amount allowed per transaction
• Permitted expense categories
• Approval requirements
• Employees authorised to use petty cash

3. Replenishing Petty Cash

As the money is spent, the petty cash balance falls. The petty cashier submits the expense details and supporting documents to the finance team. After the expenses are checked, money is provided again according to the petty cash system followed by the business.

Under the imprest system, only the amount spent is replenished so that the original petty cash balance is restored.

How Is A Petty Cash Book Balanced?

A petty cash book is balanced at the end of an accounting period by comparing the amount received with the total payments made.

For example:

Petty cash received = ₹5,000
Total expenses = ₹1,700
Closing balance = ₹3,300

Therefore:

₹5,000 - ₹1,700 = ₹3,300

The closing balance should also match the actual petty cash remaining with the cashier.

If there is a difference, the entries, vouchers, and cash available should be checked before the fund is replenished.

How is A Petty Cash Book Posted To The Ledger?

In an analytical petty cash book, expenses of the same type are recorded in separate columns.

At the end of the accounting period, the totals of these columns can be posted to the respective expense accounts in the ledger.

For example:

Instead of posting every small transaction separately, the total of each expense category can be posted to its respective ledger account.

What Is The Journal Entry For Petty Cash?

When a petty cash fund is created, the following journal entry may be passed:

Petty cash is debited because cash held by the petty cashier is an asset of the business.

The accounting entries made when petty cash is replenished depend on the accounting method and petty cash system followed by the business.

Advantages Of Maintaining A Petty Cash Book

1. Reduces The Work Of The Main Cashier

Small expenses can be handled and recorded by the petty cashier instead of being processed individually by the main cashier.

2. Keeps Petty Expenses Organised

All small payments are recorded in one place along with the date, purpose, and amount.

3. Makes Expense Tracking Easier

An analytical petty cash book shows how much has been spent on categories such as stationery, travel, postage, and refreshments.

4. Helps Check Expenses

Receipts and vouchers can be matched against the entries made in the petty cash book.

5. Makes Ledger Posting Easier

In an analytical petty cash book, totals for each expense category can be posted to the ledger instead of posting every small payment separately.

Limitations Of A Manual Petty Cash Book

A petty cash book makes small expense recording easier, but a manual system also has certain limitations.

1. Manual Errors

Expenses can be entered incorrectly or missed completely.

2. Missing Receipts

Paper bills and vouchers can be lost, especially when several employees or locations are involved.

3. Limited Visibility

Finance teams may not know how much has been spent until the petty cash records are submitted.

4. Cash Handling Risk

Physical cash can be misplaced or used for expenses that do not follow company policy.

5. Difficult To Manage Across Branches

If a business operates across several stores, branches, or offices, each location may maintain a separate petty cash balance and set of records.

Managing these records manually can require considerable follow-up and reconciliation.

How Can Businesses Manage Petty Cash Digitally?

Digital petty cash management replaces much of the physical cash and manual record-keeping used in a traditional petty cash process.

Funds can be allocated digitally, employees can make approved payments, and transaction details can be recorded as soon as a payment is made.

For a business with several branches, this also gives the central finance team a way to monitor spending across locations instead of waiting for separate registers or spreadsheets.

Manage Petty Cash Digitally With EnKash

EnKash allows businesses to manage petty cash across multiple branches through a digital system.

Finance teams can allocate branch-wise budgets and set employee-level spending limits. Employees can use UPI QR payments for petty cash for permitted petty expenses, while transaction details are available to the finance team in real time.

Businesses can use EnKash to:

• Make petty cash payments through UPI QR codes
• Set monthly budgets for individual branches
• Define employee-level spending limits
• Set transaction and merchant category restrictions
• Apply time-based payment rules
• Automate recurring fund top-ups
• Reallocate unused balances
• Capture receipts through mobile or WhatsApp
• Track expenses by branch, employee, and category
• Match transactions with receipts during reconciliation
• Identify missing receipts or mismatches
• Generate reports for accounting and audit requirements

This is particularly useful for businesses that manage petty expenses across several branches, stores, offices, or field teams and want to bring these costs into a broader expense management process.

Frequently Asked Questions

What Is A Petty Cash Book In Simple Words?

A petty cash book is a record of small day-to-day business expenses such as stationery, courier charges, travel, and refreshments.

Who Maintains A Petty Cash Book?

A petty cash book is usually maintained by a petty cashier or petty cash custodian appointed by the business.

What Are The Two Types Of Petty Cash Books?

The two main types are the simple petty cash book and analytical petty cash book.

What Is An Imprest Petty Cash System?

Under the imprest system, a fixed amount is kept for petty expenses. The amount spent during a period is later reimbursed so that the petty cash balance returns to the original fixed amount.

Is Petty Cash An Asset Or An Expense?

Cash remaining in the petty cash fund is an asset of the business. Once the money is spent, it is recorded under the relevant expense account.

What Is The Difference Between Petty Cash And A Petty Cash Book?

Petty cash is the money kept aside for small business expenses. A petty cash book is the record used to track how that money is received and spent.

How Do You Prepare A Petty Cash Book?

Record the amount received by the petty cashier and enter every expense with its date, purpose, voucher number, and amount. The remaining balance is calculated after deducting payments from the amount available.

What Expenses Are Included In Petty Cash?

Petty cash commonly covers expenses such as stationery, postage, courier charges, parking, local travel, refreshments, printing, and minor repairs. The exact expenses allowed depend on the company's policy.

What Is The Difference Between A Cash Book And A Petty Cash Book?

A cash book records the main cash and bank transactions of a business. A petty cash book records smaller, frequent expenses separately.

Can Petty Cash Be Paid Through UPI?

Yes. Businesses can use digital petty cash systems that allow approved employees to make UPI payments while finance teams set budgets, spending limits, and other controls. EnKash supports UPI QR-based petty cash payments for businesses managing expenses across multiple branches.