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Petty cash is a small amount of money used by employees for incidental expenses below a certain amount, usually around $50 USD. It can be used for office supplies, meals, entertainment, local transportation, and refunds. It requires documentation and is usually managed by a supervising employee. There are limitations and exemptions, and it cannot be used as a check fund or salary advance.
Small amount of cash is a small amount of money used by a company’s employees for incidental expenses below a certain amount, usually around $50 United States Dollars (USD) in the United States. Many financial officials agree that, in some cases, it’s inconvenient — not to mention a waste of time — to write a small business expense check. Some common uses for petty cash include purchasing office supplies and paying for meals, entertainment, local transportation, and other sundries. It can also be used to provide refunds or changes to customers. Regardless of its use, documentation is usually required to account for funds in order to avoid potential audit issues.
Sometimes called an imprest account, money from a small cash fund can be used to reimburse employees for past business-related expenses, or it can be set aside for upfront expenses. The funds are often allowed to be used to give change to customers who buy goods or services from the company as well. Also, the small amount of money is often spent on office or lab supplies, but it’s usually not spent on purchasing large items. Rather, it is usually spent on incidental expenses, such as paper and pens. Also, the academic departments of many universities that use humanities subjects in their studies reimburse the subjects using cash.
In general, most minor out-of-pocket expenses incurred by an employee in the course of business are eligible for small cash reimbursement, depending on the particular employer’s policies. Staff members of some companies often pay for local travel, including buses, taxis or the subway, for which they may be reimbursed. Office events, such as staff meetings or parties, can also be funded with small bucks, as can some business meals and other inexpensive entertainment.
There are certain limitations and exemptions related to using a small cash fund. For example, use as a check fund or source for a salary advance is generally not permitted. If your business is located in the United States, you may have some sales tax exemptions, depending on your state. Also, the amount of money in a small cash account can be increased or decreased as needed based on the policies of the organization.
A supervising employee of the firm is typically assigned as custodian of small cash funds, and maintaining the fund requires accurate documentation for accounting purposes. For example, it’s usually a good idea for employees to use application forms and itemized receipts when handling petty cash. These forms, also known as small cash vouchers, are usually available at office supply stores.
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