▪ 1. Petty cash

Most businesses keep a small amount of cash on the hand to make occasional small payments, eg staff refreshments, postage stamps, office cleaner, taxi fares, etc. This is often called petty cash.

For the purpose of internal control, a fixed sum of money, designated to be the imprest amount (float), which is estimated to cover the expenditure for a certain period, is drawn from bank to establish a petty cash fund.

Petty cash disbursements will be drawn out of the sum of money with supporting vouchers are made. At any time, the petty cash in hand plus the amount spent with the supporting vouchers for the period should always be equal to the amount of the petty cash imprest amount. At the end of the accounting year, the petty cash fund is reimbursed with the exact amount of disbursements, thus restoring the petty cash balance to the original fixed amount.