Petty Cash
Small amount of cash kept on hand for minor business expenses.
Definition
Petty cash is a small cash fund (typically $100-$500) kept on hand to pay for minor expenses that are impractical to pay by check or card: parking meters, coffee for meetings, small office supplies.
One person is responsible for the petty cash fund. When cash is used, a receipt is required. Periodically, the fund is replenished by writing a check to bring it back to the original amount, and expenses are recorded in the accounting system.
Why It Matters
Petty cash simplifies paying minor expenses without processing checks or credit card transactions. However, poor petty cash controls invite theft and abuse—require receipts, limit access, and reconcile regularly.
Many businesses are eliminating petty cash in favor of corporate credit cards, which provide better tracking, controls, and rewards. But some cash is still necessary for certain situations.
Examples
- 1
Petty cash fund established at $200. Spent $50 on parking, $25 on coffee. Replenish with $75 check, record parking expense $50, coffee expense $25.
- 2
Monthly petty cash reconciliation: count cash, review receipts, ensure total equals fund amount.
- 3
Petty cash policy: maximum $20 per transaction, receipts required for all disbursements, monthly reconciliation.
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