Petty Cash Log: Template, Rules and How to Reconcile It

Quick answer: A petty cash log is a running record of every payment from and top-up to a small on-site cash fund. Record each transaction with a voucher number, date, payee, purpose, category and amount, keep the receipt, and reconcile by checking that cash on hand plus receipts equals the fund's fixed amount before replenishing it.

Cards and digital payments have shrunk the role of cash, but many offices, shops, restaurants and job sites still keep a small cash box for parking, postage, supplies and other minor costs. Because the amounts are small, petty cash is easy to neglect, and that is exactly how it ends up as a drawer full of unlabelled receipts and a balance nobody can explain. This guide shows you how to set up a fund, keep a clean log, reconcile it, replenish it and record it in your books.

What is petty cash?

Petty cash is a small amount of physical money a business keeps on hand to pay for minor expenses where using a card, check or supplier invoice is impractical. It is managed by one person, the custodian, and controlled by a written policy, a log and receipts.

The most common setup is the imprest system: the fund is set at a fixed amount, for example $200. At any moment, the cash in the box plus the receipts for what has been spent should add up to exactly $200. When cash runs low, the fund is topped up by the total of the receipts, returning it to $200.

How to set up a petty cash fund

1. Decide the fund amount. Review recent cash purchases and set the fund to cover a typical few weeks to a month. Keep it modest; the more cash, the bigger the risk.
2. Appoint one custodian. One person is responsible for the box, the key and the log. Name a backup for holidays.
3. Write a short policy. Allowed purchases, a maximum per transaction, receipt requirements, who can approve, and what is not allowed (personal loans, IOUs, wages, supplier bills).
4. Withdraw the cash. Draw the amount from the business bank account and record it in your books as a transfer from bank to a petty cash account.
5. Store it securely. A locked cash box kept in a locked drawer or safe.
6. Prepare the log and vouchers. Use the template below and a pad of numbered vouchers.

Petty cash log template

Copy these columns into a spreadsheet or a bound book. One line per voucher, in voucher number order.

Date	Voucher no.	Paid to / received from	Purpose	Category	Cash in	Cash out	Balance	Approved by
Oct 1	—	Bank (opening fund)	Establish fund	—	$200.00		$200.00	Owner
Oct 3	PC-001	Post office	Return parcel to supplier	Postage		$14.60	$185.40	MR
Oct 6	PC-002	City parking	Client meeting	Travel		$12.00	$173.40	MR

Each voucher should show the date, amount, payee, purpose and expense category, the signature of the person who received the money and the custodian's initials, with the receipt attached. Numbered vouchers matter: a gap in the sequence is the quickest sign that something is missing.

If an employee pays for something with their own money and you reimburse them from petty cash, record it the same way and attach their receipt. A simple signed payment receipt can serve as proof when a seller cannot provide one, and our guide to invoices vs receipts explains the difference between the two documents.

Worked example: one month of petty cash

An illustrative office runs a $200 imprest fund. During October, the log shows:

Voucher	Purpose	Category	Amount
PC-001	Return parcel postage	Postage	$14.60
PC-002	Parking for client meeting	Travel	$12.00
PC-003	Printer paper and pens	Office supplies	$23.45
PC-004	Coffee and milk for office	Office supplies	$18.20
PC-005	Courier tip for urgent delivery	Postage	$5.00
PC-006	Spare key cut	Repairs	$9.50
PC-007	Taxi to supplier	Travel	$27.25
Total	Paid out in October	All	$110.00

Adding the vouchers: $14.60 + $12.00 + $23.45 + $18.20 + $5.00 + $9.50 + $27.25 = $110.00.

By category: postage $14.60 + $5.00 = $19.60; travel $12.00 + $27.25 = $39.25; office supplies $23.45 + $18.20 = $41.65; repairs $9.50. Check: $19.60 + $39.25 + $41.65 + $9.50 = $110.00.

Reconciling the fund

At month end the custodian counts $86.00 in the box.

• Expected cash: $200.00 − $110.00 = $90.00.
• Cash counted: $86.00.
• Cash + receipts: $86.00 + $110.00 = $196.00, which is $4.00 less than the $200.00 fund.
• Shortage: $4.00.

The custodian recounts, checks for a missing voucher and asks colleagues. Nothing turns up, so the $4.00 is recorded as a cash shortage in a "cash over and short" expense account, with a note in the log.

Replenishing the fund

To bring the box back to $200, the business withdraws $110.00 for the receipts plus $4.00 for the shortage, a total of $114.00. Check: $86.00 + $114.00 = $200.00. In the books, the $114.00 is recorded as postage $19.60, travel $39.25, office supplies $41.65, repairs $9.50 and cash over and short $4.00, all paid from the bank account. The petty cash balance in the books stays at $200.

How to reconcile petty cash step by step

1. Count the cash in the box, ideally with a second person present.
2. Gather all vouchers and receipts since the last replenishment and check the numbering for gaps.
3. Total the vouchers and check each one is signed and has a receipt or explanation.
4. Add cash counted and voucher total; compare with the fixed fund amount.
5. Investigate any difference: recount, look for misfiled receipts, check arithmetic.
6. Record unexplained differences in a cash over and short account.
7. Summarize spending by expense category.
8. Replenish the fund by the amount spent, plus any shortage or minus any overage.
9. Record the replenishment in your books, file the vouchers and start a new page of the log.

Do this every time you top up the fund and at least monthly as part of your month-end close, so expenses land in the right period. The process mirrors a bank reconciliation, just on a smaller scale.

Petty cash rules that prevent problems

Rule	Why it matters
One custodian, one key	Clear accountability for the balance
Maximum amount per payment	Keeps larger spending in proper approval channels
No receipt, no cash (except with a signed explanation)	Supports the expense for tax and audit
No IOUs or personal loans	IOUs turn into permanent shortages
Never top up from sales takings	Mixing cash sales and petty cash hides both
Numbered vouchers	Gaps reveal missing entries
Occasional surprise counts	Deters misuse and catches errors early

Paper or spreadsheet petty cash log?

Either works if it is kept up to date. A bound paper book stays next to the cash box, is quick to fill in and makes later alterations obvious, which is a useful control. A spreadsheet petty cash log calculates the running balance and category totals automatically and is easy to back up, but it needs someone at a computer each time cash leaves the box. Many small businesses use paper vouchers at the box and transfer them into a spreadsheet at each reconciliation.

Whichever you choose, keep one petty cash log per fund, never edit a past line (add a correcting line instead), and start a new page or tab after each replenishment so every period has a clear opening balance of the fixed fund amount. Bookkeeping apps can also hold petty cash as a separate cash account, which suits businesses that already record expenses there.

Recording petty cash in your books

Under the imprest system you make only two kinds of entries. When you set up the fund, you move money from the bank account to the petty cash account. When you replenish it, you record each expense category and the cash over and short amount, paid from the bank. You do not record each $5 purchase individually in the main books; the log holds that detail. Good bookkeeping basics make this a five-minute job.

If you increase or decrease the fund itself, for example from $200 to $300, record that change separately as a transfer between the bank and petty cash accounts.

Receipts and record retention

Petty cash payments are business expenses, so they need the same support as any other deduction. The IRS explains which records small businesses should keep, including receipts showing the amount and business purpose, in its recordkeeping guidance. Scan or photograph vouchers when you reconcile, then file the paper copies by month. For how long to keep them, see our guide on how long to keep invoices and records.

Common petty cash mistakes

• Too many people with access. When everyone can open the box, no one is accountable.
• Accepting IOUs. A note saying "borrowed $20" is a shortage waiting to happen.
• Missing or vague receipts. "Supplies" with no receipt is hard to defend in an audit.
• Replenishing without reconciling. Topping up a round number hides shortages.
• Using petty cash for large or regular bills. Supplier invoices should go through accounts payable.
• Recording individual purchases in two places. Under the imprest system, record expenses at replenishment, not twice.
• Keeping too much cash. A larger fund increases risk without much benefit.

Petty cash checklist

• Fund amount set and written in your policy.
• Custodian and backup named.
• Maximum per transaction and banned uses defined.
• Numbered vouchers in use, each with a receipt or signed explanation.
• Log updated with a running balance after every transaction.
• Fund reconciled at every replenishment and at month end.
• Shortages and overages recorded and investigated.
• Replenishment recorded by expense category in the books.
• Vouchers scanned and filed by month.

When to replace petty cash

If petty cash is used often for the same things, a business debit or prepaid card with spending limits may be easier to control, since every transaction appears on a statement. Employees who buy items for clients can also be reimbursed through expense claims and, where appropriate, the cost passed on as a reimbursable expense on an invoice. When you bill those costs, list them as separate line items with the free invoice generator, which creates the PDF in your browser; tracking and reconciling the spending itself stays in your books. For a wider system that covers cards, bank transfers and receipts too, read how to track business expenses.