Petty Cash Book – Imprest System
Imagine the CEO of Reliance asking the cashier for ₹20 to buy tea. Inefficient, right?
Solution: Petty Cash Book - A separate book for small (petty) expenses.
What is Petty Cash?
Definition: Small amount of cash kept for minor daily expenses.
Examples:
- Tea/Coffee
- Stationery (pens, papers)
- Postage stamps
- Taxi fare
- Office cleaning
- Minor repairs
What is Imprest System?
Definition: A fixed amount is given to the petty cashier at the start of the period. At period-end, whatever is spent is reimbursed to bring it back to the original amount.
Example:
- Apr 01: Given ₹5,000 to petty cashier (Imprest Amount)
- During April: Spent ₹3,200 on petty expenses
- Apr 30: Reimbursed ₹3,200 to petty cashier
- May 01: Again has ₹5,000 to start with
Advantage: Petty cashier always has a fixed amount to work with.
Format of Petty Cash Book
| Receipts | Date | Particulars | V.N. | Total Payment | Postage | Stationery | Conveyance | Sundries |
|---|---|---|---|---|---|---|---|---|
Columns:
- Receipts: Money received from main cashier
- Total Payment: Total amount of each expense
- Analysis Columns: Breakdown by expense type
Solved Example
Petty Cash Book for April 2024 (Imprest Amount: ₹5,000)
Transactions:
- Apr 01: Received ₹5,000 from main cashier
- Apr 03: Paid for postage stamps ₹150
- Apr 05: Bought stationery ₹300
- Apr 10: Taxi fare ₹200
- Apr 15: Tea/coffee ₹100
- Apr 20: Courier charges ₹250
- Apr 25: Pens and papers ₹400
- Apr 30: Reimbursed from main cashier
Solution: Petty Cash Book
| Receipts | Date | Particulars | V.N. | Total | Postage | Stationery | Conveyance | Sundries |
|---|---|---|---|---|---|---|---|---|
| 5,000 | Apr 01 | To Cash A/c | ||||||
| Apr 03 | Postage stamps | 1 | 150 | 150 | ||||
| Apr 05 | Stationery | 2 | 300 | 300 | ||||
| Apr 10 | Taxi fare | 3 | 200 | 200 | ||||
| Apr 15 | Tea/Coffee | 4 | 100 | 100 | ||||
| Apr 20 | Courier | 5 | 250 | 250 | ||||
| Apr 25 | Pens/Papers | 6 | 400 | 400 | ||||
| Apr 30 | Balance c/d | 3,600 | ||||||
| Total | 5,000 | 400 | 700 | 200 | 100 | |||
| 1,400 | May 01 | To Cash A/c (Reimbursement) | ||||||
| 3,600 | May 01 | To Balance b/d | ||||||
| 5,000 | Total |
Explanation:
- Total spent in April = ₹1,400
- Balance remaining = ₹5,000 - ₹1,400 = ₹3,600
- Reimbursement on May 01 = ₹1,400
- New balance = ₹3,600 + ₹1,400 = ₹5,000 ✅
Posting to Ledger
Only the TOTALS of analysis columns are posted:
Postage Account
| Date | Particulars | Amount |
|---|---|---|
| Apr 30 | To Petty Cash Book | 400 |
Stationery Account
| Date | Particulars | Amount |
|---|---|---|
| Apr 30 | To Petty Cash Book | 700 |
Conveyance Account
| Date | Particulars | Amount |
|---|---|---|
| Apr 30 | To Petty Cash Book | 200 |
Sundries Account
| Date | Particulars | Amount |
|---|---|---|
| Apr 30 | To Petty Cash Book | 100 |
Advantages of Imprest System
| Advantage | Explanation |
|---|---|
| Division of Work | Main cashier handles big payments, petty cashier handles small |
| Control | Fixed limit prevents overspending |
| Accountability | Petty cashier must account for every rupee |
| Convenience | No need to disturb main cashier for small amounts |
| Time-saving | CEO doesn't wait for ₹20 tea money! |
Quiz
Test Your Knowledge
Question 1 of 5
1. Imprest system means:
💡 Final Wisdom: "Petty Cash Book is like pocket money for the office. Fixed amount, spend wisely, get refill when empty. Simple and effective!"