Legal Definitions - petty cash

Petty cash refers to a small, readily available fund of money kept by a business or organization to cover minor, day-to-day expenses that are impractical or inefficient to pay through larger financial systems, such as writing a check or making an electronic transfer. This fund is typically managed by a designated individual, and expenditures from it usually require receipts or other documentation for accountability.

Here are a few examples to illustrate the concept of petty cash:

• Imagine a small graphic design studio that keeps a locked box containing $150. When an employee needs to purchase a roll of special paper for a client presentation, buy stamps for mailing invoices, or grab coffee for an important client meeting, they can take money from this fund. They are required to leave a receipt for each purchase. This demonstrates petty cash as a convenient, accessible fund for covering small, routine operational expenses that would be cumbersome to process through the company's main accounting system.

• Consider a non-profit organization hosting a charity gala. The event coordinator is given a $200 petty cash fund. During the event setup, they use this money to buy last-minute decorations, pay for an emergency delivery of ice, or tip a vendor for exceptional service. This illustrates petty cash being used for incidental, unforeseen expenses that arise during a specific project or event, where quick access to small amounts of money is essential for smooth execution.

• A local auto repair shop maintains a petty cash drawer separate from its customer payment till. The shop manager uses this fund to quickly reimburse a mechanic for a small tool they needed to buy immediately, purchase emergency cleaning supplies for a spill, or pay for a minor repair to the office coffee machine that costs less than $75. This example shows petty cash facilitating immediate, small operational needs without disrupting the main business transactions or requiring a formal payment process for trivial amounts.