Q:

What is the purpose of petty cash?

A:

Quick Answer

The purpose of petty cash is to pay for minimally priced business transactions in a cost effective way. Petty cash can only be used for transactions that are not reported to the Internal Revenue Service.

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What is the purpose of petty cash?
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Full Answer

Petty cash should be set up as an individual fund with all transaction requests and receipts and replenishment of funds being properly recorded for auditing purposes. A fund custodian is appointed to maintain and reconcile the account.

Vouchers are used to request cash from a petty cash fund. Vouchers must be pre-approved before cash can be disbursed. Receipts for purchases are matched up to voucher requests and maintained for account reconciliation.

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