How to Maintain Petty Cash Book? Format, Example & Best Practices

What is a Petty Cash Book? A Simple Guide for Beginners (2025)

📌 What is a Petty Cash Book?

Imagine you run a small shop or office, and every day, you need to spend small amounts of money on things like buying pens, paying for a courier, or getting snacks for your team. Writing a check or using a bank account for these tiny expenses would be a hassle, right? That’s where a **Petty Cash Book** comes in. It’s like a notebook where you keep track of small, everyday expenses paid in cash, so you don’t mix them up with bigger business transactions.

In simple words, a petty cash book is a record for tracking small cash payments. These are expenses too small to go through your main bank account or accounting system. For example, if you buy a ₹100 notebook for the office, you don’t want to create a big accounting entry for it. Instead, you use petty cash—a small amount of money kept on hand—and note it in the petty cash book.

A person in your business, called the **petty cashier**, is in charge of this cash. They make sure every rupee spent is recorded properly, with a receipt to prove it. The petty cash book helps keep things organized, so you know exactly where the money went. It’s especially useful for small businesses, offices, or even schools that deal with frequent small expenses.

Example: Let’s say you run a bakery. Every week, you buy small things like ₹200 for cleaning supplies, ₹150 for delivery fees, or ₹50 for a team coffee break. Instead of using your bank account for these, you keep ₹5,000 in a petty cash box. Your employee, Priya, manages this box and writes down every expense in the petty cash book, so you can track it easily.

Why is this important? Without a petty cash book, small expenses can pile up and create confusion in your main accounts. By keeping them separate, you make your accounting cleaner and easier to manage. Plus, it saves time and effort for both you and your accountant.

📋 Format of Petty Cash Book

A petty cash book is like a table where you write down details of every small expense. It’s designed to be clear and simple, so anyone can understand it. Think of it as a diary for your petty cash, where every entry tells a story about where the money went.

Here’s what a typical petty cash book looks like:

Column	What It Means
Date	When the money was spent or received.
Particulars	What the money was used for, like “Office pens” or “Taxi fare.”
Voucher Number	A number on the receipt or slip to track the expense.
Amount Received	Money added to the petty cash fund, like when you refill it.
Amount Paid	Money spent on something, like buying stamps.
Balance	How much money is left in the petty cash fund after each transaction.
Expense Category	The type of expense, like “Stationery” or “Travel.”

Most businesses use the **imprest system** for petty cash. This means you start with a fixed amount, say ₹5,000, and every time you spend some of it, you record it. When the cash runs low, you add more money to bring it back to ₹5,000. The petty cash book helps you keep track of this process.

Example: Your office petty cash starts with ₹5,000. On Monday, you spend ₹500 on printer paper. The petty cashier writes this in the book, and the balance becomes ₹4,500. On Friday, you add ₹500 back to the fund to make it ₹5,000 again. Each step is written in the table, so you always know how much cash is left.

You can keep this book on paper, in an Excel sheet, or in software like Tally. The format stays the same—it’s all about keeping things neat and organized.

🧾 Example of Entries in Petty Cash Book

Let’s make this super clear with a real-life example. Imagine you run a small tutoring center, and you’ve set aside ₹6,000 as your petty cash fund for July 2025. Your employee, Ravi, is the petty cashier, and he records every expense in the petty cash book. Here’s what the book might look like after a week:

Date	Particulars	Voucher No.	Amount Received (₹)	Amount Paid (₹)	Balance (₹)	Expense Category
01/07/2025	Opening Balance	-	6,000	-	6,000	-
02/07/2025	Whiteboard Markers	101	-	800	5,200	Stationery
03/07/2025	Tea for Staff	102	-	250	4,950	Refreshments
04/07/2025	Courier Charges	103	-	200	4,750	Postage
07/07/2025	Replenishment	-	1,250	-	6,000	-
08/07/2025	Taxi for Guest Teacher	104	-	600	5,400	Travel

What’s happening here?

• On July 1, you start with ₹6,000 in the petty cash box.
• On July 2, Ravi buys markers for ₹800, so the balance drops to ₹5,200.
• On July 3, he spends ₹250 on tea, leaving ₹4,950.
• On July 4, a courier costs ₹200, so the balance is now ₹4,750.
• On July 7, the fund is low, so you add ₹1,250 to bring it back to ₹6,000.
• On July 8, Ravi pays ₹600 for a taxi, leaving ₹5,400.

Each expense has a receipt with a voucher number, which Ravi keeps for proof. This table shows exactly where the money went, making it easy to check later.

Another Example: In a café, the petty cash book might show ₹300 for napkins, ₹150 for a cleaning mop, and ₹200 for a delivery boy’s tip. Each entry is recorded with the date and receipt number, and the balance is updated after every expense. This keeps the café’s small expenses organized without mixing them with bigger payments like rent or supplier bills.

⚙️ How to Maintain a Petty Cash Book – Step-by-Step

Keeping a petty cash book is like taking care of a small piggy bank for your business. You need to be careful and organized to make sure the money is used correctly. Here’s a simple step-by-step guide to maintain a petty cash book:

1. Choose a Petty Cash Amount: Decide how much money you need for small expenses each month. For a small shop, ₹3,000 might be enough; for a bigger office, maybe ₹10,000. Give this cash to your petty cashier.
2. Set Up the Book: Create a table like the one above, either on paper, in Excel, or in software like Tally. Include columns for Date, Particulars, Voucher Number, Amount Received, Amount Paid, Balance, and Expense Category.
3. Record Every Expense: Every time the petty cashier spends money, they write down the date, what it was for, the amount, and the receipt number. For example, if they buy ₹100 worth of stamps, they note it and keep the receipt.
4. Keep Receipts Safe: Every expense needs a receipt or slip as proof. The petty cashier should store these receipts in a file or folder, matching them to the voucher numbers in the book.
5. Add Money When Needed: When the cash runs low (say, below ₹1,000), the petty cashier shows the receipts and book to the main accountant. The accountant checks everything and gives more cash to bring the fund back to the original amount (e.g., ₹6,000).
6. Check the Balance Monthly: At the end of the month, count the cash in the box and compare it to the balance in the book. They should match. If they don’t, find out why—maybe a receipt is missing or an entry was wrong.
7. Connect to Main Accounts: Every month or so, move the petty cash expenses to your main accounting books. For example, group all stationery expenses under “Office Supplies” in your main ledger.

Example: In a small gym, the petty cashier, Neha, starts with ₹4,000. She spends ₹500 on cleaning supplies and writes it in the petty cash book with the receipt number. When the cash drops to ₹2,000, she shows the receipts to the owner, who gives her ₹2,000 to refill the fund. Neha checks the book every week to make sure the cash matches the balance.

Following these steps keeps your petty cash book accurate and makes it easy to track small expenses without confusion.

✔️ Best Practices for Managing Petty Cash

Managing petty cash well is like keeping your desk tidy—it saves you from headaches later. Here are some smart tips to make sure your petty cash system works smoothly:

• Pick One Person: Choose one trusted employee to handle the petty cash. Too many hands in the cash box can lead to mistakes or misuse.
• Use the Imprest System: Stick to a fixed amount, like ₹5,000. Only add money after checking receipts, so you always know where the cash went.
• Set a Spending Limit: Don’t let any single expense be too big, like over ₹1,000. Big expenses should go through your bank or main accounts, not petty cash.
• Do Surprise Checks: Every now and then, check the cash and the book without warning. This keeps the petty cashier honest and catches errors early.
• Use Software: Instead of a paper book, try software like Tally Prime or QuickBooks. It’s faster, reduces mistakes, and makes it easy to share data with your accountant.
• Train Your Cashier: Teach the petty cashier how to write entries, keep receipts, and check the balance. A little training goes a long way.
• Write Clear Rules: Make a list of what petty cash can be used for (e.g., office supplies, small travel costs) and share it with your team. This avoids confusion.

Example: In a small retail store, the owner sets a ₹5,000 petty cash fund and picks an employee, Anil, to manage it. They agree that no expense over ₹800 can come from petty cash. Anil uses Tally to record expenses and keeps all receipts in a folder. Every two weeks, the owner checks the book and cash to make sure everything adds up.

📊 Advantages of Petty Cash Book

Using a petty cash book is like having a small helper that keeps your business finances organized. Here’s why it’s so useful:

• Makes Small Payments Easy: You don’t need to write checks or use a bank for tiny expenses like buying pens or paying for a courier.
• Saves Time: Handling small expenses with cash is faster than processing them through your main accounts.
• Keeps Accounts Clean: By keeping small expenses separate, your main accounting books stay focused on big transactions like rent or salaries.
• Helps with Budgeting: You can see exactly how much you’re spending on things like stationery or refreshments, so you can plan better.
• Makes Audits Simple: With receipts and a clear book, it’s easy to show where the money went if someone checks your finances.
• Reduces Work for Accountants: Your accountant doesn’t have to deal with dozens of tiny entries in the main books, so they can focus on bigger tasks.

Example: A small school uses a petty cash book to track expenses like ₹200 for chalk, ₹300 for snacks for a meeting, and ₹500 for bus fare for a field trip. This keeps the school’s main accounts free of small entries, making it easier for the accountant to prepare monthly reports.

Conclusion

A petty cash book is like a little assistant that helps businesses manage small, everyday expenses without cluttering their main accounts. By keeping track of things like office supplies, snacks, or courier fees, it makes life easier for small businesses, offices, and even schools. With a clear format, regular checks, and smart practices like the imprest system, you can keep your petty cash organized and transparent. Whether you use a paper book or software like Tally Prime, the petty cash book saves time, reduces errors, and helps you stay on top of your finances. In 2025, when businesses are busier than ever, a well-managed petty cash book is a simple way to stay efficient and keep your small expenses under control.

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📚 Related Posts:
👉 What is Ledger? How to Create Ledgers in Tally
👉 Voucher Entries in Tally with Examples