May 20, 2022


Accounting + Finance Blog

Meaning of Petty Cash and Key Explanations

Meaning of Petty Cash and Key Explanations

Petty Cash is small cash expenses. Businesses keep it to avoid spending from its vault and to monitor small expenses. Normally, a small amount of cash is kept on a shelf or box from the main vault of the entity.

Definition of Petty Cash

Petty Cash is the money kept to meet small expenses that take place daily within an organization. It is also kept to meet small expenses that would occur unexpectedly.

Key Explanations

They are kept by the organization to meet small expenses conveniently. Examples of Petty cash expenses are payment of electricity bills, buying stationery, paying for minor repairs to property, plants, and equipment. They are recorded in a petty cash book.

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The expenses may occur unexpectedly. For example, the office generator may break down before planned maintenance. As a result, there may be a need to repair it or hire another for immediate use.

It is provided from the main vault. And it is given to a petty cashier that works in the organization. Therefore, not all businesses have a petty cash system (also called the imprest system).

The reason is that the entity will pay the petty cashier along with the main cashier. Again, organizations that don’t have high-volume transactions don’t need to separate both cashiers. In many small and medium-sized enterprises, the accountants who prepare the book also serve as the cashier.

Before funds are disbursed by the junior staff, a petty cash voucher is raised by staff who are responsible to make the expenses. The voucher must be authorized by one or two managers (including the audit officer) before it can be paid. This serves as a form of control mechanism to avoid spending by staff who have the intention to commit fraud.

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Finally, the amount given to the junior cashier is usually small and is returned to the main cashier at the close of business hours. The amount depends on the organization’s policy and if more expenses will be paid on that day.


In summary, petty cash is usually added to the main cash periodically to know the total cash of a business. This system is mostly used by large entities that can afford to pay a junior cashier and have large volumes of transactions.