Petty Cash
A small cash fund maintained by businesses to pay for minor day-to-day expenses without going through formal payment processes.
What is Petty Cash?
Petty cash is a small amount of physical cash kept on hand by a business to cover minor, incidental expenses that are impractical to process through regular accounts payable procedures. Common petty cash expenditures include office supplies, postage, refreshments, and small travel costs. A designated custodian manages the fund, recording each disbursement with a receipt or voucher. When the fund runs low, the custodian submits all receipts to the accounting department, which issues a replenishment check equal to the total amount spent and reconciles the fund.
Example
A company maintains a $500 petty cash fund. During the month, the custodian pays $12 for postage, $35 for office supplies, and $48 for a team lunch. When the fund reaches $405, the custodian submits $95 in receipts and receives a $95 replenishment check, restoring the fund to $500.