What Is Petty Cash?

Definition, the imprest system, and a worked example.

Quick answerPetty cash is a small amount of cash kept on hand to pay minor day-to-day expenses such as stationery, postage and refreshments, so that the main bank account is not used for every small payment.

Common system	Imprest (fixed float) system
Kept by	The petty cashier
Topic	Financial accounting · Cash control

Petty cash in plain English

Under the imprest system the petty cashier starts with a fixed float, say 500. Each payment is supported by a petty cash voucher. At the end of the period the cashier is reimbursed exactly the amount spent, which restores the float to 500.

Worked example

A float of 500 is used for stationery 200 and postage 120. The total spent is 320, so the business reimburses 320.

Account	Debit	Credit
Stationery expense	200
Postage expense	120
Bank (cash paid to restore the float)		320

The petty cash tin again holds 500: 180 in cash left plus 320 reimbursed.

Common mistakes

Paying out without a voucher.
Topping up with a round number instead of the exact amount spent, which breaks the imprest system.

Frequently asked questions

What is the imprest system?

A system with a fixed petty cash float that is topped up by exactly the amount spent each period.

What is a petty cash voucher?

A document recording each small payment, who received it and what it was for.

Is petty cash an asset?

Yes. It is a current asset because it is cash held by the business.

Keep learning

This page is for general learning. Accounting rules vary by country and standard.