Petty cash is a small amount of discretionary funds in the form of

cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-immed ...

used for expenditures where it is not sensible to make any disbursement by

cheque A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The pers ...

, because of the inconvenience and costs of writing, signing, and then cashing the cheque. The most common way of accounting for petty cash expenditures is to use the imprest system. The initial fund would be created by issuing a cheque for the desired amount. An amount of $100 would typically be sufficient for most small business needs as the expenses to be covered are for small amounts. The bookkeeping entry for this initial fund would be to debit Petty Cash and credit bank account. This cheque would then be cashed to acquire the actual cash needed for payments. As expenditures are made, the custodian of the fund (a bookkeeper or a member of the administration staff) will reimburse employees and receive a petty cash

voucher A voucher is a bond of the redeemable transaction type which is worth a certain monetary value and which may be spent only for specific reasons or on specific goods. Examples include housing, travel, and food vouchers. The term voucher is also a ...

with a receipt/invoice attached in return. At any given time, the total of cash on hand plus reimbursed vouchers must equal the original fund. When the fund gets low, e.g. $20 remaining, the custodian requests a top up and submits the vouchers for reimbursement. Assuming the vouchers add up to $80, an $80 top up cheque is issued and an $80 debit towards office expenses is recorded. Once the cheque is cashed, the custodian again has cash at the original amount of $100.

Audit controls

Oversight of petty cash is important because of the potential for abuse. Examples of petty cash controls include a limit (such as 10% of the total fund) on disbursements and monthly

audit An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing ...

s by someone other than the custodian. Use of petty cash is sufficiently widespread that vouchers for use in reimbursement are available at any office supply store. The petty cash daybook is one of the

daybooks Day Book may refer to: * ''The Day Book'', a newspaper in Chicago 1911–1917 * '' Weekly Day Book'', a newspaper which primarily existed to propagate white supremacist ideas, 1848–1879 * General journal, or day book **a day book in bookkeeping ...

used in bookkeeping and the

double-entry bookkeeping system Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to ...

References

{{Reflist Payments Accounting journals and ledgers de:Kasse#Portokasse