What Are Common Uses for Petty Cash?

Petty cash is a small amount of money used by the employees of a business for incidental expenses below a certain amount, usually around $50 US Dollars (USD) in the United States. Many financial officers agree that, in certain cases, it is not cost effective — not to mention a waste of time — to issue a check for small business expenditures. Some common uses for petty cash include purchasing office supplies and paying for meals, entertainment, local transportation, and other miscellaneous fees. It can also be used to provide reimbursements or change to customers. Regardless of its use, documentation is usually required to account for the funds in order to avoid potential auditing issues.

Sometimes called an imprest account, the money from a petty cash fund can be used to reimburse employees for past business-related expenditures, or it can be set aside for anticipated expenditures. The funds are often permitted to be used to give change to customers who purchase goods or services from the business as well. In addition, petty cash is frequently spent on office supplies or laboratory necessities, but it is not usually intended for purchasing large items. Rather, it is usually spent on incidentals, such as paper and pens. Furthermore, many universities' academic departments that utilize human subjects in their studies reimburse the subjects using petty cash.

In general, most minor out-of-pocket expenses incurred by an employee during the course of business are eligible for petty cash reimbursement, depending on the particular policies of the employer. Staff members of certain businesses often pay for local travel, including a bus, taxi or subway, for which they can be reimbursed. Office events, such as staff meetings or parties, can also be funded with petty cash, as can certain business meals and other inexpensive entertainment.

There are certain limitations and exemptions related to using a petty cash fund. For example, it is typically not permitted to be used as a check-cashing fund or a source for a salary advance. If the business is located in the U.S., there may be certain sales tax exemptions to account for as well, depending on the state. Furthermore, the amount of money in a petty cash account may be increased or decreased as necessary, subject to the policies of the organization.

A supervisory employee of the business is generally assigned as the custodian of petty cash funds, and maintaining the fund requires accurate documentation for accounting purposes. For example, it is usually a good idea for employees to use request forms and itemized receipts when handling petty cash. These forms, also known as petty cash vouchers, are generally available at office supply stores.