What is petty cash?

Petty cash is a small amount of cash kept on hand for minor business expenses that are impractical to pay by check or card. For professional service firms, petty cash covers small purchases like office supplies, postage, or parking while maintaining proper documentation.

Key characteristics

• Small cash fund on hand

• For minor expenses

• Requires documentation

• Periodic replenishment

• Subject to controls

• Fixed fund amount

Why it matters for professional service firms

Petty cash provides flexibility for small expenses but requires controls to prevent misuse. Proper documentation ensures expenses are recorded and tax-deductible. Professional service firms should maintain petty cash with clear policies, receipt requirements, and regular reconciliation.

Real-world example

Kevin established a $300 petty cash fund. Process: custodian maintained cash box; each disbursement required a receipt documenting the amount, date, purpose, and recipient. When cash was depleted to $50, submitted receipts for reimbursement check of $250, restoring the fund to $300, monthly reconciliation verified that cash plus receipts equaled $300. Clear controls prevented misuse.