Petty cash refers to a small amount of money that is kept in a secure location within an office or business to cover small, often unexpected, expenses. This fund is used for transactions that do not warrant issuing a larger payment, such as reimbursing an employee for office supplies or paying for a delivery fee. The petty cash fund is typically managed by a designated employee and is reconciled regularly to ensure all transactions are accounted for.
For example, if a team member purchases refreshments for a meeting, they may be reimbursed from the petty cash fund. Another example is using petty cash to buy stamps for mailing letters.
Petty cash transactions are recorded to track the usage of the funds, and the fund is replenished when the balance is low. Petty cash ensures that small expenditures do not disrupt the regular financial processes of issuing payments or checks, enhancing efficiency in day-to-day operations.