Petty Cash

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DEFINITION of 'Petty Cash'

A small fund of cash kept on hand for purchases or reimbursements too small to be worth submitting to the more rigorous purchase and reimbursement procedures of a company or institution. Petty cash funds must be safeguarded and documented to ensure that thefts do not occur. Often a custodian for the funds is appointed who is held responsible for any shortfall or lack of documentation of petty cash.

BREAKING DOWN 'Petty Cash'

To prevent theft, it is commonplace to require strict documentation of any use of petty cash. For example, use of petty cash may require the employee to complete a form checking out the funds and subsequently submit a receipt for purchases and return any extra change. Alternatively, employees may be asked to make purchases themselves and then get reimbursed from the fund after an expense report is submitted. Petty cash funds must be periodically audited to ensure that the balance of the fund is correct.

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