Petty Cash and Cash Sales: How to Record Them Properly

Cash sales are recorded in full on the day they are taken, backed by a till reading or a daily cash sheet, and ideally banked intact. Petty cash is recorded through a fixed float, with a voucher or receipt for every payment out, and counted regularly so that cash plus receipts always equals the float. Those two routines are all most small businesses need. This guide shows how to set them up and how to deal with the awkward cases, such as paying a supplier straight from the till.

Key takeaways

• All cash income is taxable and must be recorded, whether or not it is banked.
• Record gross takings each day, then record anything paid out of them separately.
• Run petty cash as a fixed float: cash in the tin plus vouchers should always equal the float.
• Keep cash sales and petty cash apart. They are two different things.
• Sole traders keep records for at least 5 years after the 31 January filing deadline. Companies keep them for 6 years from the end of the financial year.

What are cash sales and petty cash?

Cash sales are money your customers pay you in notes and coins. They are business income, the same as a card payment or a bank transfer.

Petty cash is a small amount of the business's own money kept to hand for minor purchases where using a card or raising a payment is impractical: a pint of milk, a parking charge, a pack of stamps.

What the rules require

HMRC expects you to keep records of all sales and income and all business expenses, and to be able to show them if asked. The GOV.UK guide to business records if you're self-employed lists till rolls, bank slips and receipts among the types of proof to keep. If you are self-employed you must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year. For the 2025/26 return, due online by 31 January 2027, that means until at least the end of January 2032.

Limited companies must keep accounting records for 6 years from the end of the financial year they relate to. The detail is on GOV.UK under company and accounting records. Our guide on how long to keep business records goes through the time limits in more depth.

Recording cash sales

The aim is a clear trail from each sale to the bank statement.

• Start each day with a known till float. This is change for customers, not sales. Use the same amount every day.
• Take an end-of-day reading. On most tills this is called a Z reading. It totals the day's sales and usually splits them between cash and card. If you have no till, use a daily cash sheet: a simple page listing each sale or the day's total, signed and dated.
• Count the drawer. Cash counted, less the float, should equal the cash sales on the reading. Note any difference on the day, while you can still remember what happened.
• Bank the cash intact. That means paying in the whole of the day's or week's cash takings, without first spending some of it. When takings are banked intact, the paying-in slip matches the till reading and bank reconciliation becomes straightforward.
• File the evidence together. Keep the Z reading or cash sheet with the paying-in slip for that deposit.

When cash is paid directly out of takings

Sometimes cash has to leave the till: the window cleaner wants paying, or you run out of bags. This is where records most often go wrong. If you bank what is left and record that figure as your sales, your income is understated and the expense is missing altogether.

The correct treatment has three parts:

• Record the full cash sales shown on the till reading as income.
• Record the payment as an expense, with the receipt.
• Record the smaller amount actually banked. Sales less the payment should equal the deposit.

Running a petty cash float (the imprest system)

The imprest system is the standard way to control petty cash. You decide on a fixed float, say £100, withdraw it from the bank and put it in a locked tin. From then on one rule always holds: the cash in the tin plus the vouchers and receipts in the tin equals the float.

• Every payment out needs a voucher. A petty cash voucher records the date, amount, what it was for and who took the money. Attach the receipt. If you are VAT registered, you will normally need a valid VAT receipt to reclaim the VAT.
• Top up to the fixed amount. Add up the vouchers, withdraw exactly that sum from the bank, and the tin is back to the float. The top-up and the expenses claimed are the same figure.
• Never top up from the till. Doing so blurs sales and expenses and breaks the trail to the bank.

Cash sales and petty cash compared

Step by step: a weekly cash routine

1. Daily: take the till reading, count the drawer, leave the float and bag the takings with the reading.
2. Daily: write down anything paid out of the till and keep the receipt with that day's reading.
3. Daily or weekly: bank the takings and keep the paying-in slip or deposit receipt.
4. Weekly: count the petty cash tin. Add cash and vouchers and confirm they equal the float.
5. Weekly: enter the vouchers in your bookkeeping software by expense type, and enter each day's sales.
6. Weekly or monthly: withdraw the top-up and restore the float.
7. Monthly: reconcile the bank and check every cash deposit ties to a till reading. Our month-end bookkeeping checklist covers the rest of the close.
8. Ongoing: store the paperwork, or clear photos of it, for the full retention period. See our tips on organising receipts and invoices.

Worked example (illustrative)

"Maple Street Bakes", an illustrative example, is a small bakery run by a sole trader. The till float is £50 and the petty cash float is £100.

On Saturday the Z reading shows cash sales of £412.50 and card sales of £388.00. During the day the owner paid the window cleaner £15.00 in cash from the till and kept his receipt. At closing, the drawer holds £447.50. The check works like this: £50.00 float plus £412.50 cash sales is £462.50, less the £15.00 paid out, leaves £447.50. The drawer agrees.

She leaves the £50.00 float and banks £397.50. In the books she records cash sales of £412.50, a cleaning expense of £15.00 and a bank deposit of £397.50. She does not record sales of £397.50.

On Friday she counts the petty cash tin. It holds three vouchers: £23.40 for milk, £12.00 for stamps and £31.10 for cleaning materials, a total of £66.50. The cash left is £33.50. Together they make £100.00, so the tin balances. She withdraws £66.50 from the bank to restore the float and enters the three expenses under their categories.

The business and figures are invented for illustration and are not a real client.

Common mistakes

• Recording only what was banked. Sales are what the till says, not what reached the bank.
• Using the till as petty cash. It hides both income and expenses.
• No voucher, no receipt. An expense you cannot evidence is hard to support if HMRC asks.
• Topping up by a round amount. If the top-up does not equal the vouchers, the float drifts and stops being a control.
• Mixing personal and business cash. Money taken for yourself is drawings or a director's loan entry, not a business cost.

How we can help

We set up simple cash routines for shops, cafes, tradespeople and drivers, then keep the books up to date so cash, card and bank all agree each month. Our bookkeeping service starts from £150 per month on a fixed fee. View our pricing, or contact us if your cash records need straightening out before your next return.