A small amount of cash kept on hand in a business for minor, day-to-day expenses that are too small or impractical to pay by cheque or digital transfer.
Petty cash funds cover small operational expenses like office supplies, courier charges, tea/coffee for meetings, auto/cab fares, and minor repairs. The system works on the imprest method: a fixed amount (say ₹10,000) is allocated. As expenses are made, receipts are collected. When the fund runs low, it's replenished back to the original amount. A petty cash book records all transactions. Internal controls for petty cash include: designated custodian, receipt requirement for every expense, regular reconciliation, and surprise audits.
A company maintains ₹10,000 petty cash. This week's expenses: Courier ₹250, Office supplies ₹1,200, Client parking ₹100, Refreshments ₹800 = Total ₹2,350. Cash remaining: ₹7,650. At month-end, ₹2,350 is replenished from the main bank account.
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It depends on the frequency and size of small expenses. Typically ₹5,000–25,000 for small businesses, ₹25,000–1,00,000 for medium businesses. Keep it minimal — large petty cash balances increase theft risk and earn no interest.
Yes, though its importance has reduced. Some expenses still require cash (certain vendors, parking, tips, emergency repairs). However, many businesses are moving to digital expense management with corporate cards and UPI, significantly reducing petty cash needs.
The systematic recording, organizing, and maintaining of all financial transactions in a business on a day-to-day basis.
A record of a financial transaction in the accounting system, showing the accounts affected, amounts debited and credited, date, and description.
The net amount of cash and cash equivalents moving into and out of a business during a specific period.
A transaction involving the transfer of funds between a company's own cash and bank accounts, recorded on both the debit and credit sides of the cash book.
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