What is Petty Cash, Definition, Benefits and Purpose

Rancakmedia.com – Do you know the meaning of petty cash? If you don't know it yet, see the article that we have provided below so that you get the information.

Financial management is an important and even vital factor in small and large companies. Because with systematic management, the company's potential will be seen clearly.

This means that with good financial management, company progress can also be known accurately. Petty cash is included in this.

Of course, to build effective financial management, the right system is very important, including a system that complies with the rules or culture of the company that implements it.

Related to this system, there are many systemic factors that must be used in managing financial management. Proper cash management is one of them. This is a system phrase in financial management that is very significant.

Definition of What is Petty Cash

Petty cash is a small amount of money allocated for the purpose of paying for simple expenses incurred by a company in the day-to-day operations when it is not possible to issue checks of high value.

Every company needs cash for daily expenses. Not all expenses can be paid by bank check or bank transfer.

Definition of What is Petty Cash

Minor costs need to be covered via cash exclusively. At the same time, certain receipts need to be paid in cash, such as sales of used goods, etc.

Petty cash is an important aspect of the accounting function and is generally taken care of directly by personal accounts.

Purpose of Creating Petty Cash

Petty cash is included in the company's financial management depending on the goals set. The following is the purpose of making petty cash that has been set, as follows:

Handling Equipment Issues within the Company

The first function is to manage equipment or equipment financing issues that arise within the company. because company supplies often have lower costs than other expenses.

Because small-scale finance requires a unique and special accounting program, known as a petty cash bookkeeper, to record transactions.

Preventing Allocation of Payments

The holding of records in petty cash is to prevent payment allocation errors. Companies will not pay high if the transaction costs are small and vice versa. Because everything is described in different bookkeeping.

For those willing to pay a small fee, the information is available in petty cash only, of course! Meanwhile, to pay for the company's enormous whims, the facts have to be looked up in several books for them to be valid.

The understanding is that if they are willing to pay a small fee, then the data is in the petty cash. Meanwhile, to pay for a very large company, the data is in a different book.

Preventing Allocation of Payments

Lighten Employee Work

Petty cash also has the goal of easing the work of employees because it helps make it easier for employees to report their performance to business partners and superiors.
With petty cash, it certainly makes the mapping of money spent clearer. So that preparing materials for reports becomes easier and does not take up much time.

Expediting Incidental Policy Determination

Sometimes superiors make incidental or sudden policies for the company. But with the existence of petty cash and large cash, of course pre-policy research becomes simpler.

Because of the solid foundation upon which the decision was made, there will be no problems in the future. This suggests that despite the haste and rush of the research, the new strategy is really based on previously collected data.

Petty Cash Benefits

Apart from having a clear function, petty cash should also be produced because there are advantages. The following are the benefits in question, namely:

Make it easier for accountants to record finances

The job of an accountant is quite heavy. One of the jobs of an accountant is to submit periodic financial reports. Therefore, an accountant must have skilled financial analysis skills and have the right accuracy.

By creating a petty cash account, it will be easier for an accountant to record the company's finances, because the analysis method only relies on the integration of financial data from the entire company.

To Improve Customer Service

 Improved customer service is a benefit of petty cash bookkeeping. With the enactment of petty cash, this accounting is needed in the company's financial management.

Office meetings are a common occurrence. There is even a unique agenda for this activity. including meetings outside the office that are held at certain times.

Provision of consumption for this agenda must be done. Of course, it costs money to offer decent customer service.

With petty cash, responsible employees don't have to worry about treats that aren't good enough because all the money is taken out of the company and then reported in the accounting.

To Improve Customer Service

To Issue a Company Emergency Fund

Of course, this division would not propose to issue small amounts of money to the company, especially since the funds themselves were earmarked for large transactions.

Unless the division has its own cash reserve, which can be used to fund the division. In addition, the money in this petty cash account can be transferred to other departments that need it.

Petty Cash Recording Method

In handling the finances in the company, a special method of recording petty cash is needed, below are matters related to recording petty cash, namely:

Fixed Method

The fixed method or better known in accounting is the Imprest Fund System, which is a standard method of bookkeeping for tracking petty cash. The purpose of this method is to record a petty cash account whose nominal amount is always the same.

This usually happens because the amount issued and the amount included in the petty cash are the same. Thus, the petty cash balance remains constant (does not change).

Fluctuation Based Method

The Fluctuation Method is a way of recording small amounts of money whose nominal value changes regularly. Of course, this is the reverse method of the first petty cash recording method, namely the Imprest Fund System or fixed method.

The discrepancy between income and expenditure leads to the fluctuation method. This occurs when the deposit fund does not have the same costs. It is possible that the balance is more than the money spent, or vice versa.

Petty Cash Supporting Documents

To record incoming and outgoing expenses in the petty cash book, various supporting documents are needed, here are some documents that need to be prepared:

Petty Cash Supporting Documents

Proof of Cash Out

Accounting documents so-called cash-out receipts include instructions for removing cash from a large cash budget. The amounts and information stated are contained in legal documents. Proof of cash out is required as a document record when refilling the fund budget.


A check is a document that instructs the bank to pay a specified amount to the person or organization whose name appears on the check document.

Expenditure Request Letter

By using this letter, the company's petty cash fund holder can request a certain amount of money to be used for a specific purpose. This document must be stored neatly because it is evidence against the holder of the petty cash fund as proof of expenditure.

Expenditure Proof

This document can be legal proof of the use of petty cash expenses for the company's operational needs. This document is linked to the invoice documentation and submitted to the company's accountant.

Replenishment Proof

The company's accountant uses this document to replenish the previously provided funds. So that the costs incurred for refilling can be replaced.

Petty Cash Tax

Taxes increase the cost of any expenditure with a value added component. Currently, the VAT fee is 11% of the total expenditure. Documentation of tax costs can be a consideration for replenishing the budget.

How to Use Petty Cash

In petty cash expenses may be issued for needs that can be used only. So in using petty cash, you must first know the methods, as follows:

How to Use Petty Cash

  1. Expense tracking used by petty cash users must go through authentication first. Then attach the amount of money in the form of a voucher.
  2. Calculate the cash disbursement that has been given each month by comparing the amount of money that has been returned. The applicant must sign the voucher to be eligible for the requested amount of petty cash.
  3. Also update the petty cash log by ensuring the amount of money that has been issued, the date of disbursement of money, and the total cash balance after the petty cash was issued.


Some examples of questions and answers about what is petty cash are as follows:

Why Should Every Petty Cash Expenditure Be Recorded?

Because every fund issued by petty cash must be recorded in order to facilitate the bookkeeping recorded by the accountant.

Why is petty cash needed as internal control in a company?

Using rules set by the central company, the petty cash internal control system controls how the company uses petty cash and helps prevent it from being misused.


Petty cash is a series of funds specially developed by the company. Petty cash is often used to pay for things like meeting meals, transportation, and other small items.

So it can be concluded that petty cash is only used for the needs of companies that issue funds in a simple way.

This is information about what is a petty cash fund, I hope the article above can be helpful and useful for all of you.

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