Petty cash is a small amount of physical cash a business keeps on hand for minor expenses, controlled through a float and receipts to keep it accountable.
Petty cash is a small fund of physical cash for incidental costs, postage, small supplies, parking, that are impractical to pay by cheque or card. It is managed as an imprest float: a fixed amount that is topped back up to its set level periodically, with receipts accounting for every dollar spent.
Though small, petty cash needs controls, a custodian, receipts for every disbursement, and periodic reconciliation, because untracked cash is both a bookkeeping gap and a fraud risk. Each replenishment posts the expenses to the proper accounts, so petty cash spending still flows through the books.
A business keeps a $200 petty cash float. After $150 of small purchases with receipts, it replenishes $150 to restore the $200 float, recording the expenses to their categories at that point.
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