Petty cash

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Bookkeeping
 Key concepts

● Daybooks
● Double-entry
● General ledger
● T Accounts
● Trial balance
● Journal
● Debits and credits
● Chart of accounts
● Petty cash
● Imprest system
● Bank reconciliation
● Ledger
● Single-entry
● Bookkeeper
● Assets
● Liabilities
● Equity
● Income
● Expenses
● Depreciation
● Accruals
● Prepayments
● VAT/GST

Financial statements

● Balance sheet
● Income statement

Related professions

● Accountant
● Accounting technician
● Accounts clerk

● v
● t
● e

Petty cash is a small amount of discretionary funds in the form of cash used for expenditures
where it is not sensible to make any disbursement by cheque, because of the inconvenience
[1]
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.
[2]
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 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.