CLASS XI CHAPTER 4 (D) Petty Cash Book & Imprest System: Rules, Format & Practical Examples

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Study Note: Petty Cash Book & The Imprest System

In any business, alongside major transactions like purchasing machinery or paying large supplier invoices, there are hundreds of small, day-to-day expenses. These include buying stamps, paying for a taxi, purchasing tea for guests, or buying printer paper.

If we record all these tiny transactions in the main Cash Book, it will become unnecessarily bulky, and the Chief Cashier will be overburdened. To solve this, businesses appoint a Petty Cashier and maintain a separate register called the Petty Cash Book.

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1. The Imprest System (Very Important)

The most scientific and widely used method for maintaining a Petty Cash Book is the Imprest System. Here is how it works:

1. At the beginning of a period (e.g., a month), the Chief Cashier gives a fixed, predetermined amount to the Petty Cashier. This fixed amount is called the Imprest Amount (let's say Rs. 5,000).
2. Throughout the month, the Petty Cashier pays for small expenses out of this Rs. 5,000 and records them in the Petty Cash Book.
3. At the end of the month, the Petty Cashier totals the expenses. Let's assume they spent Rs. 4,200. This leaves a balance of Rs. 800 in hand.
4. The Chief Cashier verifies the accounts and reimburses exactly the amount spent (Rs. 4,200). Now, the Petty Cashier again has Rs. 5,000 (800 balance + 4,200 reimbursement) to start the next month!

🌟 Why use the Imprest System?
It provides excellent control over small expenses. The Petty Cashier can never spend more than the fixed Imprest limit, and the Chief Cashier only has to make one main ledger entry at the end of the month for the total reimbursement.

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2. Analytical Petty Cash Book

There are two types of Petty Cash Books: Simple and Analytical. The Analytical (or Columnar) Petty Cash Book is the standard format used in accounting.

Instead of just listing payments in one column, the Analytical book has multiple "Analysis Columns" for common expenses (like Postage, Stationery, Conveyance). When a payment is made, the amount is written twice: once in the "Total Payments" column, and once in the specific "Analysis" column.

📝 Practical Question

Prepare an Analytical Petty Cash Book on the Imprest System for January 2026. The Imprest amount is Rs. 2,000.

• Jan 01: Received cash from Chief Cashier to make up the Imprest Rs. 2,000.
• Jan 03: Paid for Postage stamps Rs. 150.
• Jan 05: Purchased Stationery Rs. 250.
• Jan 08: Paid auto fare (Conveyance) Rs. 100.
• Jan 12: Paid Cartage for goods Rs. 80.
• Jan 15: Bought tea and snacks for office guests (Sundry Expenses) Rs. 120.
• Jan 31: Balanced the book and received a cheque from the Chief Cashier to restore the Imprest.

Step-by-Step Logic

Jan 01: Record the receipt of the Imprest. Write 2,000 in the Receipts column on the far left. Particulars: To Cash/Bank A/c.

Jan 03: Write 150 in the Total Payments column, AND write 150 in the Postage analysis column.

Jan 05: Write 250 in the Total Payments column, AND 250 in the Stationery analysis column.

Jan 08: Write 100 in Total Payments, AND 100 in the Conveyance analysis column.

Jan 12 & 15: Similarly, route Cartage (80) and Sundries (120) to their respective columns.

Jan 31 (Balancing): Total Payments = Rs. 700. Balance c/d = (2000 - 700) = Rs. 1,300.

Jan 31 (Reimbursement): To restore the Imprest of Rs. 2,000 for February, the Chief Cashier gives a cheque for exactly the amount spent. Write Rs. 700 in the Receipts column.

Solution: Analytical Petty Cash Book

Receipts (Rs.)	Date	V.N.	Particulars	Total Payments (Rs.)	Analysis of Payments (Rs.)
					Postage	Stationery	Conveyance	Cartage	Sundries
2,000	Jan 01		To Cash A/c	-	-	-	-	-	-
-	Jan 03		By Postage A/c	150	150	-	-	-	-
-	Jan 05		By Stationery A/c	250	-	250	-	-	-
-	Jan 08		By Conveyance A/c	100	-	-	100	-	-
-	Jan 12		By Cartage A/c	80	-	-	-	80	-
-	Jan 15		By Sundry Exp. A/c	120	-	-	-	-	120
-	Jan 31		By Balance c/d	1,300	-	-	-	-	-
2,000	TOTALS			2,000	150	250	100	80	120
1,300	Feb 01		To Balance b/d
700	Feb 01		To Bank A/c (Reimbursement)	*Imprest restored back to 2,000*

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