What is Petty Cash?

what is petty cash

Petty cash is a term that is used in accounting to describe the funds that businesses use for various small transactions. Typically, this cash is used in place of checks, debit cards, or credit cards to fund transactions that do not exceed $25. Accounting degree majors will need to learn many things about petty cash funds including its common uses, how much money to keep in the fund, how to manage the funds, and how to replenish them when necessary.

Common Uses of Pin Money

When working towards an accounting degree, students will learn that there are many valid uses for a petty cash fund, sometimes referred to as pin money. As described in the introduction to this article, these funds are often set aside for use to fund small transactions of $25 or less. This can include many different things depending on each businesses’ unique needs, but some examples of what pin money may be used for are listed below.

  • Stamps and Postage Due
  • Snacks for Company Meetings
  • Taxi Cab Fares
  • Small Office Supply Purchases or Reimbursements
  • Small Delivery Charges
  • Tolls and Parking Fees

Determining the Amount to Keep

The American Accounting Association sets the standards for accounting degree education, and one thing that accounting students will learn is how to determine the amount of pin money that their employers will need. While some companies may only need to set aside a small amount of money in these types of funds, other businesses may need larger amounts. The amount needed is usually determined by examining past transactions and can range anywhere from as little as $50 to as much as $500.

Managing Pin Money Funds

No matter how much money is taken out of the petty cash fund, it is essential that the fund custodian maintains consistent records of each and every transaction. Management of these funds should be assigned to one person, and the cash should be kept in a locked box, drawer, or company safe. Each time money is taken out, a voucher for that specific amount needs to be placed into the box, drawer, or safe. This voucher should include such important information as the amount of the transaction, the date, the name of the person receiving the money, that person’s signature, and a brief description explaining why the money was needed.

Replenishing Petty Cash

Another thing that accounting degree students will learn is that petty cash funds are typically replenished at set times, usually monthly. When determining the amount of funds that will need to be replenished, the custodian will add up all of the vouchers in the fund’s box, drawer, or safe. This will be the amount that needs to be replenished. This amount, when added to the remaining cash in the funds, should be equal to the fund’s allowable monthly total. At this time, the custodian will then request that a check be written for the amount needed to replenish the funds.


There are many times when businesses may need small amounts of money to fund various transactions. Maintaining a petty cash fund simplifies these types of transactions by allowing businesses to pay small amounts of money in cash rather than writing checks or using debit or credit cards.

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