What Is Petty Cash?
Petty cash is a small amount of physical cash a business keeps on hand to pay for minor, incidental expenses that are impractical to cover by check or card. It's managed through a petty cash fund that's periodically replenished and reconciled.
What petty cash is and why it matters
Petty cash handles the small stuff — office supplies, postage, a quick delivery — where cutting a check would be overkill. It's controlled through an imprest system: the fund starts at a fixed amount, each disbursement is backed by a receipt, and when cash runs low it's replenished back to the original balance by recording the expenses. Though small, petty cash needs the same control discipline as any cash account: without receipts and periodic reconciliation, it's an easy spot for money to go missing. It appears as a current asset on the balance sheet.
A worked example
A business sets up a $200 petty cash fund. Over a month, it pays out $45 for postage, $60 for supplies, and $35 for a courier — $140 in receipts, leaving $60 in the box. To replenish, it records the expenses (debit *Postage* $45, *Supplies* $60, *Delivery* $35) and credits *Cash* $140, bringing the fund back to $200. The receipts plus remaining cash should always equal the $200 fund total.
How firms handle it today
Firms reconcile petty cash by confirming that receipts plus remaining cash equal the fund balance, then record the expenses at replenishment — a small but control-sensitive task.
Related terms
- Reconciliation
- Current asset
- Audit trail
- Cash flow
- Expense
FAQ
What is petty cash used for?
Small, incidental expenses like postage, office supplies, or minor deliveries where a check or card is impractical.
What is the imprest system?
A method where the petty cash fund is kept at a fixed amount and replenished by the total of receipts, so cash plus receipts always equals the set balance.
Is petty cash an asset?
Yes — it's a current asset, part of the company's cash on hand.