Petty cash is a small amount of physical cash a business keeps on site to cover minor expenses - stationery, tea, small deliveries - where raising a full invoice and payment is not practical. It is replenished from the bank account as it is spent, against receipts or vouchers.
What it means
The float is recorded as a current asset. Each payment out of it is supported by a slip or receipt, and the float is topped back up to its fixed amount (the imprest system), with the expenses recognised at that point.
Where it fits in
Petty cash and payroll are unrelated cash pools - employees are never paid wages from petty cash, since statutory deductions, payslips and bank payment all require the full payroll process.
Key rules
- A small cash float for minor, low-value expenses.
- Replenished against receipts under the imprest system.
- Recorded as a current asset until spent.
- Never used to pay wages or salaries.
