Petty cash
Learn what petty cash is, how it works, and how to record and control it in your small business.
September 2023 | Published by Xero
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Petty cash is a small cash fund for minor business costs, such as office supplies, parking, courier fees and meeting snacks.
- You set up the fund, pay from it, collect a receipt for each payment, then top it back up.
- Recording each top-up against the right expense accounts keeps your books accurate and supports tax deductions.
- One custodian, a locked box, written limits and regular reconciliation keep the fund under control.
What is petty cash?
Petty cash is a small amount of cash a business keeps on hand to pay for minor, everyday purchases. It lets you cover small costs quickly without a bank transfer or card payment each time.
Picture an office that runs out of staples before a big print job, or a café that runs low on milk during the morning rush. With a cash box on site, a staff member can pop to the nearest minimarket and keep work moving.
Even though these payments are small, you still need to track them. They add up over a year, and accurate records help you claim eligible business costs at tax time.
Examples of petty cash expenses
A cash fund usually pays for small overheads and one-off costs that are quicker to settle in cash. Common examples include:
- Office supplies (alat tulis kantor, or ATK), such as paper and staples
- Parking fees for staff visiting clients or suppliers
- Ojek and courier fees for sending documents or picking up small items
- Snacks and drinks for staff meetings, or a birthday card for a team member
- Meterai stamps for contracts and other official documents
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.
Types of petty cash
Businesses often group cash funds into four types, based on what the money is for. Imprest also describes a method you can use to run any fund, explained in the imprest vs fluctuating section below.
- A general fund covers a range of occasional small expenses
- An imprest fund holds a set amount for a defined period, and that amount stays the same
- An emergency fund is set aside for urgent costs, such as restocking an essential supply or paying a supplier on the spot
- A discretionary fund pays out only for expenses a manager or owner approves
How petty cash works
A cash fund runs in a simple cycle that repeats each time the cash gets low. Here’s how it works:
- Set up the fund. Decide on an amount, withdraw it from your business bank account and hand it to one custodian.
- Pay and collect receipts. Each time someone takes cash, they get a receipt or fill in a voucher showing the amount and what it paid for.
- Record the spending. Match each receipt to an expense account, such as office supplies or parking, in your books.
- Replenish the fund. When the cash runs low, add up the receipts and top up the box by the amount spent.
Imprest vs fluctuating method
You can run your fund with one of two methods. The difference is whether the fund’s total stays fixed or changes over time.
With the imprest method, the fund always returns to the same set amount. You top it up by exactly what was spent. The cash in the box plus the receipts should always equal that amount, so checks are quick.
With the fluctuating method, you top up by whatever amount suits you at the time, so the fund’s total moves up and down. It gives you more flexibility, though you’ll record each expense as it happens and track the changing balance more closely.
How to record petty cash
Recording a cash fund uses double-entry bookkeeping, where each transaction affects two accounts. Here’s a simple example using the imprest method.
You set up a Rp1.000.000 fund by debiting petty cash Rp1.000.000 and crediting bank Rp1.000.000. During the month, your team spends Rp300.000 on office supplies and Rp150.000 on parking, collecting a receipt for each payment.
To replenish, you withdraw Rp450.000 and record it by debiting office supplies Rp300.000 and parking Rp150.000, then crediting bank Rp450.000. The fund is back at Rp1.000.000, and each cost sits in the right expense account. Many businesses use accounting software to post these entries and keep receipts with each transaction.
These records matter at tax time. If you keep books and pay income tax at the standard rates, business costs paid from petty cash can generally be deducted under Pasal 6 of the Income Tax Law (UU PPh), as explained by the Ministry of Finance. This doesn’t apply if you use the 0.5% final tax scheme.
Keep your receipts safe too. Bookkeeping records and supporting documents, including receipts, must be kept for 10 years, as DDTC News explains.
How much petty cash to keep
The right amount depends on your own spending patterns, so start with your records. Look back over two to four weeks of small cash purchases and add them up.
Set the fund to cover that period, then review it after a few cycles. If you’re topping up several times a week, raise the amount. If cash sits unused for weeks, lower it and keep the rest in the bank.
Tips for controlling petty cash
Cash is easy to lose track of, so a few simple habits keep your fund accurate. These controls work well for most small businesses:
- Give one custodian responsibility for the fund
- Keep the cash in a locked box in a secure place
- Get a receipt or signed voucher for every payment
- Regularly reconcile the cash and receipts against the fund amount
- Run surprise counts from time to time
- Write a policy that sets spending limits and lists approved expenses
Petty cash vs cash on hand
Petty cash is money set aside specifically for small purchases. Cash on hand is broader: it includes all of a business’s cash and liquid assets, such as cash in registers and money in bank accounts.
On the balance sheet, petty cash is a current asset. According to Corporate Finance Institute (CFI), it’s grouped with the general cash account under current assets.
Track petty cash with Xero
A well-run cash fund gives you quick access to money for small costs while keeping every rupiah accounted for. Xero accounting software lets you record petty cash transactions and reconcile them with your bank, so your books stay up to date.
Try it for your business and get one month free.
FAQs on petty cash
Here are answers to common questions about managing a cash fund.
Is petty cash an asset?
Yes. The unspent balance stays in current assets, while the amounts you’ve spent move to expense accounts and show on your profit and loss statement.
What is Uang Persediaan?
Uang Persediaan is the government’s version of petty cash. It’s a revolving advance that the State Treasury Service Office (KPPN) gives to a spending treasurer (Bendahara Pengeluaran). The Directorate General of Treasury (DJPb) explains how it covers day-to-day operational costs and gets topped up.
What expenses shouldn’t be paid from petty cash?
Salaries, staff loans, personal purchases and anything above your policy limit are better paid another way. Larger bills go through your accounts payable process, where they can be approved and paid by bank transfer.
What if petty cash doesn’t balance?
Recount the cash, then check with the custodian for missing receipts or unrecorded payments. Record a small gap in a cash over and short account, and review your controls if gaps keep appearing.