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Cash in the petty cash box plus vouchers does not add up to the fixed float, and the gap is topped up without explanation.
Under the imprest system, cash on hand plus signed vouchers must equal the float; reimbursement equals the cash drawn, split into vouchers and any shortage.
Fixed float, numbered and signed vouchers, a petty cash book, a count signed by a second person at every reimbursement.
A signed count sheet showing float, cash counted, voucher total and an explained or approved difference, plus the reimbursement entry.
Petty cash reconciliation proves that the cash left in the box plus the signed vouchers equals the fixed float you set at the start. That float is called the imprest. If the two do not agree, the gap is a shortage, a missing voucher or an arithmetic error, and it has to be found and recorded before the box is topped up.
How does the imprest system work, and what goes in the petty cash book?
Under the imprest system, the business gives the petty cashier a fixed amount, say ₹10,000. The cashier pays small expenses from it: courier charges, tea and snacks, local conveyance, stationery. Every payment needs a voucher, signed by the person who received the money, with the date, amount and purpose. A bill or receipt is attached where one exists.
At the end of the week or month, the main cashier reimburses exactly what was spent, bringing the float back to ₹10,000. Because the float is fixed, any shortage shows up at once.
The petty cash book records the float received, each payment and the reimbursement. It usually has analysis columns, such as conveyance, postage, stationery and refreshments, so that the totals can be posted to the right expense ledgers in one entry.
Worked example: a ₹10,000 imprest with a ₹50 gap
The float is ₹10,000. At the week-end count:
| Item | Amount |
|---|---|
| Imprest (float) | ₹10,000 |
| Cash counted in the box | ₹3,640 |
| Cash drawn during the week (₹10,000 less ₹3,640) | ₹6,360 |
| Signed vouchers: conveyance ₹2,480, courier ₹1,350, stationery ₹1,620, refreshments ₹860 | ₹6,310 |
| Unexplained difference (₹6,360 less ₹6,310) | ₹50 |
The check: ₹3,640 cash plus ₹6,310 vouchers equals ₹9,950, which is ₹50 short of the ₹10,000 float.
The reimbursement is ₹6,360, the amount that brings the box back to ₹10,000. The entry is:
- Debit Conveyance ₹2,480, Courier ₹1,350, Stationery ₹1,620, Refreshments ₹860
- Debit Cash Shortage ₹50 (after investigation and approval)
- Credit Bank (or main cash) ₹6,360
Debits total ₹6,360, credits total ₹6,360. The ₹50 is recorded in its own account, with a note of what was checked, rather than buried inside stationery.
Common causes of a petty cash gap, and how to check each
| Cause | How to check |
|---|---|
| Missing voucher | Ask the cashier to list all payments from memory or messages; check for unsigned slips |
| Staff advance not recorded | Ask whether any employee took cash “until tomorrow”; record it as an advance, not an expense |
| Wrong change given or received | Compare vouchers with attached bills; check rounding on cash purchases |
| Same expense booked twice | Look for two vouchers with the same bill number, amount or date |
| Float used for personal needs | Do a surprise count; a recurring shortage is a control issue, not an error |
How often should petty cash be counted, and who should sign the count?
Count petty cash at every reimbursement, typically weekly or monthly, and at the financial year end on 31 March. Add an occasional surprise count. A count is stronger when a second person, such as the accountant or a manager, does it in front of the cashier and both sign the count sheet.
Good habits for a small business:
- Keep the float small enough to cover one to two weeks of minor expenses.
- Number vouchers in sequence so a missing one is obvious.
- Set a single-payment limit; anything above it goes through the bank.
- Never mix personal money with the box.
- Record shortages openly, with approval.
From the cash box to the bank
Petty cash is the smallest cash trail in a business. The next level is the daily takings from a shop counter, UPI and card terminals, and how that cash and those credits are tied to bank deposits.