Bookkeeping Basics · Edmonton
Petty cash bookkeeping, down to the loonie.
A small cash float is handy, and it's also the easiest place in a business for money to go missing. Here's how to run petty cash properly, with a worked month and every entry.
By the Plum team- Updated Oct 2026
- 8 min read
- Petty cash is a small fixed float, kept in its own asset account.
- Every withdrawal needs a receipt or a signed voucher.
- Top it up by exactly what was spent, and record the expenses then.
- Pull out the GST from receipts so you can claim input tax credits.
- Count it regularly. Cash plus receipts must equal the float.
Petty cash bookkeeping is about one small box of money and a surprisingly important rule: at any moment, the cash in the box plus the receipts for what's been spent must add up to the amount you started with. Get that rule right and petty cash is simple. Ignore it and it becomes a slow leak nobody can explain.
Fewer businesses use cash than they did, but plenty still keep a float: a salon buying milk and coffee for the waiting area, a contractor paying for parking downtown, a shop buying stamps or cleaning supplies. This guide shows the standard method (the imprest system), a fully worked month with GST, the journal entries, and how to run it in QuickBooks Online.
1How the imprest petty cash system works
"Imprest" just means the fund has a fixed size. You decide on an amount that covers a few weeks of small purchases, often $100 to $500, and it never changes unless you deliberately change it.
- Set up: withdraw the float from the bank and put it in a locked box with one person responsible for it.
- Spend: every time money comes out, a receipt goes in. No receipt? A signed petty cash voucher with the date, amount, purpose and who took it.
- Replenish: when cash runs low, or at month end, add up the receipts, withdraw exactly that amount from the bank, and put it in the box. The float is back to its original size.
- Record: the expenses are recorded at replenishment, from the receipts, in one entry.
The beauty of the system is that the petty cash account in your books always shows the float. It only changes when you set up the fund or change its size. All the spending flows through the replenishment entries.
2Petty cash bookkeeping: a worked month
Say you own a hair salon in Edmonton, registered for GST, and you set up a $300 petty cash float on October 1.
Step 1: set up the fund
| Account | Debit | Credit |
|---|---|---|
| Petty cash | $300.00 | |
| Business chequing | $300.00 | |
| Totals | $300.00 | $300.00 |
This is just money moving from one asset to another. No expense yet.
Step 2: spend during the month
By October 31 the box holds four receipts. Each total includes 5% GST. To find the GST in a GST-included amount, divide by 21 (because 5 ÷ 105 = 1 ÷ 21).
| Receipt | Total paid | GST (total ÷ 21) | Before GST |
|---|---|---|---|
| Office supplies | $63.00 | $3.00 | $60.00 |
| Postage | $21.00 | $1.00 | $20.00 |
| Parking for a supplier visit | $15.75 | $0.75 | $15.00 |
| Cleaning supplies | $52.50 | $2.50 | $50.00 |
| Total | $152.25 | $7.25 | $145.00 |
Step 3: count the box
The cash count is $147.75. Check: $147.75 cash + $152.25 of receipts = $300.00. It balances.
Step 4: replenish and record
Withdraw $152.25 from the bank to bring the box back to $300, and record the spending:
| Account | Debit | Credit |
|---|---|---|
| Office supplies | $60.00 | |
| Postage and delivery | $20.00 | |
| Parking | $15.00 | |
| Cleaning supplies | $50.00 | |
| GST paid on purchases (ITC) | $7.25 | |
| Business chequing | $152.25 | |
| Totals | $152.25 | $152.25 |
The petty cash account wasn't touched: it still shows $300, and the box holds $300. Expenses are recorded in the month they happened, and you've picked up $7.25 of input tax credits you'd otherwise have lost.
What if it doesn't balance?
Say the count had been $146.75 instead of $147.75. You'd look for a missing receipt first. If you can't explain the $1.00, you'd replenish $153.25 (to restore the full float) and record the extra $1.00 as a debit to a Cash over and short expense account. Small, rare differences happen. Regular ones mean the fund needs tighter control.
Changing the size of the float
If $300 runs out every week, increase it. Say you raise the float to $500: withdraw an extra $200 and record it as a debit to Petty cash and a credit to the bank. That's the only time the petty cash account itself changes, apart from setting it up or closing it. Shrinking it works the same way in reverse, with the extra cash deposited back in the bank. Size the float for a few weeks of normal spending and no more.
What to write on a petty cash voucher
Sometimes there's no receipt: a parking meter, a tip to a delivery driver, a lost slip. A voucher fills the gap. Write the date, the amount, what it was for, the business reason, and who took the cash, and have the person sign it. A voucher supports the expense in your books, but it won't support an input tax credit, because it doesn't come from the supplier. If vouchers start outnumbering real receipts, that's a habit to fix.
Closing a petty cash fund
If you stop using petty cash, replenish it one last time from the receipts, then deposit the full float back in the bank: debit the bank, credit Petty cash. The account goes to zero and you can make it inactive. Leaving an old petty cash balance on the balance sheet for years is a common clean-up item when a new bookkeeper takes over.
3Petty cash in QuickBooks Online
- Create the account. In the chart of accounts, add an account called Petty cash with the type Bank (it holds cash, so it behaves like a bank account without a feed).
- Fund it with a Transfer (under + New) from chequing to Petty cash for $300.
- Record the spending. Either enter each receipt as an expense with Petty cash as the payment account, then transfer the replenishment from chequing, or record one expense paid from chequing at replenishment, split across the categories with the GST codes. Both are fine; the first gives a more detailed record.
- Reconcile it. If you record each receipt against Petty cash, reconcile the account to your cash count at month end, just like a bank.
- Attach the receipts. Snap a photo and attach it to the transaction so the documentation lives with the entry.
4Common petty cash mistakes
- Paying staff or contractors from petty cash. Wages need payroll with source deductions, and contractor payments need invoices. Petty cash is for small purchases only.
- Putting cash sales into the petty cash box. Customer cash belongs in the till and then the bank, recorded as sales. Mixing the two makes both impossible to track.
- Personal IOUs. "I'll pay it back Friday" notes in the box are the start of most petty cash problems.
- Expensing the top-up without receipts. If you record a $150 withdrawal as "miscellaneous", you lose the categories, the GST credits and the audit trail.
- Too big a float. More cash than you need is more cash to lose. Size the fund for a few weeks of spending.
- Several people with access and nobody responsible. One custodian is the simplest control there is.
- Letting it run for months. Replenish at least monthly, even if the box still has cash, so the expenses land in the right month and the right GST period.
- Treating meals like supplies. If petty cash buys a client lunch, code it to meals and entertainment, which is generally only 50% deductible for income tax.
Petty cash routine
Petty cash is a small part of the books, but it uses the same principles as everything else: double-entry, documentation and regular reconciliation. If cash is a bigger part of your business, Plum can set up a simple system that holds up at GST time. We work with salons, studios and trades across Edmonton, St. Albert, Spruce Grove and Stony Plain; book a quick call.
5Questions people ask
What is petty cash in bookkeeping?
Petty cash is a small amount of cash kept on hand for minor business purchases like postage, parking or supplies. In the books it's its own asset account, separate from the bank.
What is the imprest system for petty cash?
You set a fixed float, say $300. Each time you top it up, you replace exactly what was spent, based on the receipts. Cash plus receipts should always equal the float.
How do I record petty cash expenses?
When you replenish the fund, record one entry that debits each expense category and the GST paid, and credits the bank for the total cash added back. The petty cash account itself stays at the float amount.
Can I claim GST on petty cash purchases?
Yes, if you're GST registered and you keep receipts that meet CRA's documentation rules. Larger purchases need more detail on the receipt, such as the supplier's GST number.
What if petty cash is short?
Count it, check for missing receipts, and if the gap can't be explained, record it to a Cash over and short account. Repeated shortages are a sign the fund needs tighter control.
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Book a free 15-min callThis article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.