Petty cash
Learn what petty cash is, how it works, and how to set up, record and reconcile a fund.
September 2023 | Published by Xero
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Petty cash is a small fund of physical cash kept on site for minor, everyday business costs like stamps or parking
- A fixed float looked after by one named custodian keeps the fund easy to control
- Petty cash is a current asset, and everything you buy with it is recorded as an expense
- Regular reconciling keeps the fund accurate, and a receipt for every purchase supports your tax records in Ireland
What is petty cash?
Petty cash is a small fund of physical cash kept on site to pay for minor, everyday business costs. It covers purchases too minor or too urgent to put through your bank account.
Picture an office running out of staples mid-morning, or a café that needs an emergency block of cheese before the lunch rush. Someone takes €10 from the box and comes back with the item and a receipt.
These amounts are tiny on their own but add up over a year. Tracking each one shows you where your cash goes and helps you claim what you’re entitled to at tax time.
Examples of petty cash expenses
Petty cash suits one-off purchases of a few euro that someone needs to make quickly. These are some of the most typical examples for a small business.
- Stamps and postage for a last-minute letter
- Parking fees when visiting a client or supplier
- Coffee and milk for the staff kitchen
- Stationery such as pens, envelopes or printer paper
- Cleaning products for the office or shop floor
- A birthday card for a member of staff
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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.
Keep wages, large one-off purchases, recurring bills and personal spending out of the fund. Pay these through your bank account or payroll so each one has a clear record.
Types of petty cash
Businesses usually run the fund in one of four ways, depending on how often they spend cash and who signs it off. Choose the one that matches how your team works.
- General petty cash covers a range of occasional costs, such as postage or kitchen supplies
- Imprest petty cash starts with a fixed float, which you top back up to the same amount after each reconciliation
- Emergency petty cash is set aside for urgent needs, such as replacing supplies or paying a supplier after a payment fails
- Discretionary petty cash is released only for costs a manager or owner has approved
The imprest method makes checking easy. At any point, the cash in the box plus your receipts should equal the float.
How to set up a petty cash fund
A petty cash fund works best when the rules are clear before any cash goes in the box. Follow these steps to set one up.
- Decide the amount. Xero’s guide to managing a petty cash account suggests most small businesses start with €100–€500.
- Choose a custodian. Give one trusted person responsibility for handing out cash and collecting receipts.
- Write a petty cash policy. Set out what the fund can pay for and a per-purchase limit, for example €30.
- Store the cash securely. Keep it in a locked cash box and limit access to the custodian and one backup keyholder.
- Start a petty cash book. Log every payment and top-up with the date, amount, purpose and voucher number.
How to record petty cash
Petty cash is a current asset on your balance sheet, because it’s cash your business owns and can spend within a year. The things you buy with it are expenses.
Two records keep this accurate day to day. A petty cash voucher is a slip showing the date, amount, reason and signature for each spend, with the receipt attached. The petty cash book is the running log where the custodian records every voucher and top-up.
In double-entry bookkeeping, every transaction affects two accounts in your general ledger. Here’s how two common transactions look.
- Withdrawing €200 from the bank to fund the box: debit petty cash €200 and credit bank €200
- Spending €20 on stationery: debit office supplies expense €20 and credit petty cash €20
The first entry moves money between two asset accounts, so your total assets stay the same. The second reduces petty cash and records the cost as an expense.
How to reconcile and top up petty cash
Reconciling means checking that the cash in the box plus your receipts adds up to the float you started with. Once the numbers match, you top the fund back up.
- Count the cash. Write the total left in the box in your petty cash book.
- Total the receipts. Add up every voucher and receipt issued since the last top-up.
- Check the numbers match. Cash plus receipts should equal your starting float.
- Investigate any difference. Look for missing vouchers or counting errors, then record any unexplained gap as a cash shortage or overage.
- Top up the fund. Withdraw exactly the amount spent so the box returns to its original float.
Here’s how that works with a €200 float. At the end of the week you count €47.50 in the box, so your receipts should total €152.50. If they do, withdraw €152.50 to bring the float back to €200.
Setting up petty cash as its own account in accounting software makes this quicker. You can match each top-up to the bank withdrawal and keep receipts with the transaction.
Petty cash vs cash on hand and expense reimbursements
Petty cash is easy to mix up with your wider cash on hand and with employee expense reimbursements. Each one works differently.
Petty cash vs cash on hand
Cash on hand is all the physical cash a business holds, including petty cash and the cash in your till. Petty cash is a set-aside portion of that total, with its own float and spending rules. Money in your bank accounts is recorded separately as cash at bank.
Petty cash vs expense reimbursements
With an expense reimbursement, an employee pays with their own money, submits the receipt and gets repaid later. Petty cash suits minor purchases that need cash straight away, while reimbursements suit larger costs such as travel. Both help you track business expenses when every payment has a receipt.
Petty cash records and tax in Ireland
Spending from the box is part of your business costs, so the same Irish tax rules apply as for any other expense. Good records make those costs easier to claim.
In Ireland, a business expense is generally deductible when it’s incurred wholly and exclusively for the purposes of the trade, as PwC’s Ireland tax summary explains. Personal purchases fail this test, which is another reason to keep them out of the fund.
Revenue expects businesses to keep records and supporting documents such as receipts, generally for six years, as set out in its record-keeping guidance. Keep a receipt for every spend and store it with your petty cash book.
Keep track of petty cash with Xero
A well-run fund gives you a clear view of minor costs and makes tax time easier. Xero accounting software helps you keep petty cash spending organised alongside the rest of your books, so small costs stay visible.
Try Xero today and get one month free to see how easily you can stay on top of everyday spending.
FAQs on petty cash
Here are quick answers to common questions about running the fund day to day.
Who should manage petty cash?
One trusted person, such as an office manager, should hold the key, with a named backup for when they’re away. Asking someone else to do the reconciliation adds a useful second check.
How often should you reconcile petty cash?
Reconcile weekly, or every time you top up the float if that happens sooner. A business that spends cash daily, like a café, may prefer a quick count at closing.
What happens if a receipt is lost?
Write a signed note with the date, amount, supplier and purpose of the purchase, and ask the custodian to countersign it. Keep these notes for rare cases, as a receipt is stronger proof for tax.
Do very small businesses need petty cash?
A business debit card may be simpler if you’re a sole trader or rarely pay in cash. Every purchase then shows up in your bank feed with no cash box to count.
Is petty cash a liability?
No, it’s money your business owns, so it counts as an asset. A liability only arises when you owe someone money, such as an employee waiting to be reimbursed.