Skip to content

Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

Petty Cash Book and Imprest System Explained

Updated 10 October 2026 · Fact-checked

A petty cash book records small, routine cash expenses such as postage, tea and conveyance. Under the imprest system, the petty cashier gets a fixed float, spends from it, and the main cashier reimburses exactly the amount spent. Opening balance plus reimbursement equals the imprest amount.

Understand Petty Cash Book and Imprest System

A business has many small payments every day: courier charges, stationery, tea, bus fares. Writing each one in the main cash book would fill it with tiny entries. So the firm hands a small amount to a junior employee, the petty cashier, who records these payments in a separate book called the petty cash book.

The most common method is the imprest system. The head cashier fixes an amount, called the imprest or float, say ₹5,000. The petty cashier spends from it during the period (a week or a month) and keeps a voucher for each payment. At the end of the period, the head cashier pays back only the amount spent. The petty cashier then starts the next period with the full ₹5,000 again.

The analytical petty cash book has an amount column on the receipt side and, on the payment side, a Total Payment column followed by analysis columns such as Postage, Stationery, Travelling and Sundry. Each payment is entered once in the total column and once in the right analysis column. This makes posting easy, because you post only the column totals to the ledger.

The petty cash book differs from the main cash book in purpose. The cash book records all cash receipts and payments. The petty cash book records only small expenses and is kept by a junior. It is a book of original entry and, in the analytical form, also helps with ledger posting.

The cash with the petty cashier at any time plus the expenses already spent since the last reimbursement should always equal the imprest amount. This is what makes the system a good control.

Key formulas to remember

Amount to be reimbursed
Reimbursement = Total payments made during the period
Under the strict imprest system the float is restored to the fixed amount, so reimbursement equals expenses.
Imprest check
Imprest amount = Closing petty cash balance + Total payments
Use this to find a missing closing balance or total payments.
Closing balance
Closing balance = Opening balance + Amount received − Total payments
Opening balance plus reimbursement received at the start of a period gives the total cash available.
Column check
Total payments column = Sum of all analysis column totals
If these do not agree, you have missed or misplaced an entry.
Opening float for a new period
Opening balance + Reimbursement = Imprest amount
After reimbursement the petty cashier holds the full imprest again.

How to solve Petty Cash Book and Imprest System questions

Follow the same order for every petty cash book question, whether you must prepare the book or only find one figure.

  1. 1Read the imprest amount and the opening balance. Opening cash may be given or equal to the imprest.
  2. 2Write the receipt side first: opening balance and any cash received from the head cashier.
  3. 3List each payment in date order. Enter the full amount in the Total Payment column.
  4. 4Enter the same amount in the correct analysis column, such as Postage, Stationery or Travelling. Use Sundry for items that fit nowhere else.
  5. 5Total the Total Payment column and each analysis column. Check that analysis totals add up to the total column.
  6. 6Find the closing balance: total receipts minus total payments.
  7. 7Reimbursement equals total payments under the imprest system. Show it on the receipt side for the next period, then carry down the closing balance.

Quickest way: Imprest shortcut for MCQs

When to use it: Use this when the question asks only for the reimbursement amount, closing balance or one analysis total, not the full book.

  1. Reimbursement needed = sum of payments. Add only the payments, ignore receipts.
  2. Closing balance = imprest − payments (when the period started with the full imprest).
  3. If the question gives the closing balance, payments = imprest − closing balance.
  4. For an analysis column, add only the items of that type. Watch for items that belong to a different head.
  5. Scan the options. Remove any value larger than the imprest if it is asked as a balance.

Common mistakes in Petty Cash Book and Imprest System

  • Reimbursing the imprest amount instead of the amount spent.

    The word imprest makes students think the whole float is paid again.

    Fix: Reimburse only what was spent. The float is restored to its fixed level by that payment.

  • Entering a payment only in the analysis column.

    Students focus on classification and forget the total column.

    Fix: Every payment goes in both the Total Payment column and one analysis column.

  • Treating a capital item as a petty expense.

    Small amounts look like routine costs.

    Fix: Record only small, routine revenue expenses in the petty cash book. Capital items, such as furniture or equipment, are normally paid through the main cash book or bank with proper authorisation, even when the amount is small.

  • Forgetting the opening balance when finding the closing balance.

    Students total only the reimbursement received.

    Fix: Closing balance = opening balance + cash received − total payments.

  • Posting individual items to the ledger instead of column totals.

    Students treat the petty cash book like a journal.

    Fix: Post each analysis column total as one debit to its expense account, and credit the petty cash account or cash book once.

  • Confusing it with the cash book, saying petty cash records all cash transactions.

    Both are cash books by name.

    Fix: Petty cash book is for small routine payments, kept by a petty cashier, usually with analysis columns.

Worked examples

Example 1

A firm keeps a petty cash float of ₹2,000 under the imprest system. During a week the petty cashier paid: postage ₹300, stationery ₹450, conveyance ₹250, tea and refreshments ₹200. How much must the head cashier reimburse, and what is the balance in hand before reimbursement?

Show the solution
  1. Total payments = 300 + 450 + 250 + 200 = ₹1,200.
  2. Under the imprest system, reimbursement = total payments = ₹1,200.
  3. Balance in hand before reimbursement = 2,000 − 1,200 = ₹800.
  4. After reimbursement, cash = 800 + 1,200 = ₹2,000, the imprest amount.

Answer: Reimbursement is ₹1,200 and the balance before reimbursement is ₹800.

Example 2

Prepare the analysis totals of a petty cash book for the month. Imprest ₹5,000 (opening balance ₹5,000). Payments: Postage ₹600, Stationery ₹1,100, Travelling ₹900, Postage ₹400, Sundry ₹500. Find the total payments, each analysis total, the closing balance and the reimbursement.

Show the solution
  1. Postage = 600 + 400 = ₹1,000.
  2. Stationery = ₹1,100.
  3. Travelling = ₹900.
  4. Sundry = ₹500.
  5. Total payments = 1,000 + 1,100 + 900 + 500 = ₹3,500. Check with the individual items: 600 + 1,100 + 900 + 400 + 500 = ₹3,500.
  6. Closing balance = 5,000 − 3,500 = ₹1,500.
  7. Reimbursement = ₹3,500, which brings the cash back to ₹5,000.

Answer: Total payments ₹3,500; closing balance ₹1,500; reimbursement ₹3,500.

Exam tips

  • For MCQs, reimbursement under the imprest system equals total expenses. Do not add the opening balance.
  • Check that analysis columns add up to the Total Payment column. This catches slips quickly.
  • Read carefully whether the question asks for the balance before or after reimbursement.
  • Know the definition-type questions: imprest system, float, analytical petty cash book, and how it differs from the cash book.
  • Do not spend time on long layouts in MCQs. Use totals and subtraction.

Practice questions from Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

Petty Cash Book and Imprest System in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Petty Cash Book and Imprest System: frequently asked questions

What is the imprest system of petty cash?

The head cashier gives the petty cashier a fixed amount called the imprest. At the end of the period, only the amount spent is reimbursed so the float returns to its original level.

What is the difference between a cash book and a petty cash book?

The cash book records all cash receipts and payments and is kept by the main cashier. The petty cash book records small routine expenses and is kept by a petty cashier, often with analysis columns.

What is an analytical petty cash book?

It is a petty cash book with a Total Payment column and extra columns that classify expenses, such as postage, stationery and travelling. Column totals are posted to the ledger.

Is the petty cash book a book of original entry?

Yes. Payments are first recorded in it from vouchers, and its totals are then posted to the ledger accounts.