Definition
Petty cash is a small amount of cash held on premises by a business to pay for minor incidental expenses where issuing a cheque or processing a card payment would be disproportionate to the value. Typical petty cash uses: postage stamps, taxi fares, refreshments for office visitors, small office supplies, milk and coffee. The petty cash float is controlled through the imprest system: a fixed total amount that always equals the sum of cash on hand plus supporting vouchers and receipts.
What petty cash means in practice
For a bookkeeper, petty cash is the legacy workflow that most modern SMBs are eliminating. The imprest system works: an initial float (typically 100 to 500) is established with a single bank-to-petty-cash transfer. Each petty-cash payment is supported by a voucher and receipt. The float always equals cash + vouchers + receipts at any point. When cash runs low, the bookkeeper reimburses the float back to the original amount by posting all accumulated vouchers as expenses and topping up the cash.
In 2026 practice, petty cash is increasingly obsolete. Corporate cards (Capital on Tap, American Express Business), per-employee debit cards (Pleo, Revolut Business, Wise Business), and reimbursement apps (Pleo, Spendesk, Brex) make it trivial to give every employee a controlled spending limit. Receipt-capture apps integrated with the card spend produce automatic AP entries with input-tax tracking. Cash creates fraud and reconciliation risks that cards do not, and the operational benefit of cash (immediate small payment) is no longer significant when contactless cards and mobile payments are universal.
A practical example: a UK consultancy that retained petty cash through 2024. They held a 200 float in the office safe. Typical uses: 5 for milk and coffee per week, 12 per month for postage and small office supplies, occasional 20-30 for an unexpected office expense. Total monthly petty cash spend: roughly 50. In Q4 2024 the founder eliminated petty cash entirely: gave the office manager a Revolut Business card with a 200 monthly spending limit and integrated the card with Dext for receipt capture. Petty cash float reduced to zero; same operational outcome with full digital audit trail and no fraud risk.
How petty cash works by country
United Kingdom
No statutory rules on petty cash specifically. HMRC accepts petty cash as supporting documentation for input VAT recovery provided each receipt meets the simplified VAT invoice requirements (total under 250 inclusive of VAT, supplier name and VRN, supply date, description, VAT rate). Records must be retained for 6 years under VAT Notice 700/21. Most UK SMBs eliminated petty cash by 2024-25 as corporate-card alternatives matured.
Australia
The ATO accepts petty cash for input tax credit support if each receipt meets the tax invoice requirements. For amounts under AUD 82.50, a regular receipt is sufficient (no tax invoice needed). For AUD 82.50 to AUD 1,000, a tax invoice with the 7 required details is needed. Records retained 5 years.
Canada
The CRA accepts petty cash for input tax credit support if each receipt meets the documentation thresholds under the Input Tax Credit Information Regulations: under CAD 100 simplified (supplier name, date, total), CAD 100-499.99 intermediate (adds supplier BN and tax amount). Records retained 6 years.
New Zealand
The IRD accepts petty cash for input tax recovery if each receipt meets the taxable supply information requirements: under NZD 200, a till receipt is sufficient. Records retained 7 years (the longest in our target jurisdictions).
Singapore
IRAS accepts petty cash for input tax recovery provided each receipt has the supplier’s GST registration number and meets section 7.1.4 requirements. Records retained 5 years. Singapore’s GST InvoiceNow mandate (starting 2025-26) does not require petty-cash purchases to move to the Peppol network.
Related terms
Petty cash is a small-scale alternative to other payment workflows:
- An expense report is the employee-out-of-pocket alternative.
- Accounts payable is the supplier-invoice alternative for larger amounts.
- A tax invoice (or simplified equivalent) is what supports any input-tax claim on a petty cash purchase.
- Reconciliation of the petty cash float is a routine monthly task while petty cash exists.
- The float top-up posts a journal entry that debits the categorised expense accounts and credits cash.
See also
For the corporate-card alternative that has largely replaced petty cash, see the expense report entry.
FAQ
See the answered questions above for the imprest system, why petty cash is being eliminated, and input-tax recovery on petty-cash purchases.