Petty cash
Learn what petty cash is, how imprest funds work, and how to record and control petty cash in your business.
September 2023 | Published by Xero
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Petty cash is cash kept on hand for minor business costs, and it’s a current asset on your balance sheet
- An imprest fund is topped back up to the same fixed balance each time, so any shortfall is easy to spot
- Every payout needs a receipt or voucher so you can record the expense and meet Singapore’s record-keeping rules
- PayNow, company cards and staff expense claims can replace most cash payouts, while a small float still suits cash-only vendors
What is petty cash?
Petty cash is a small amount of cash a business keeps on hand for minor, everyday costs. It covers purchases too small or urgent for your usual payment process.
Say your printer runs out of paper an hour before a client meeting. A staff member takes S$15 from the petty cash box, buys a ream nearby and hands back the receipt and change.
Petty cash is a current asset on your balance sheet, because your business can spend it straight away. The things you buy with it are expenses, which you record when you top the fund back up.
What petty cash can be used for
Petty cash suits small, one-off costs that can’t wait for an invoice. Typical uses include:
- office supplies such as staples or printer paper
- courier fees and postage for urgent deliveries
- taxi fares for short work trips
- refreshments for staff meetings or client visits
- a block of cheese when your cafe runs short mid-service
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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.
Larger or regular payments are easier to track through your bank account. Keep these out of the petty cash box:
- personal spending by staff or owners
- large purchases such as equipment or furniture
- salaries, wages or staff advances
- regular supplier bills, which belong in your accounts payable process
Types of petty cash funds
Petty cash funds differ in how you top them up and what you use them for. There are two ways to top up a fund.
An imprest fund keeps a fixed balance, say S$200. Whenever the cash runs low, you replace exactly what was spent, so cash plus receipts should always add up to S$200.
A fluctuating fund has no set balance, so you top it up by whatever amount suits you. It’s more flexible, but gaps are harder to spot than in an imprest fund.
You can also label funds by purpose, so you might set up:
- a general fund that covers a mix of occasional expenses
- an imprest fund that holds a set amount for a defined period, such as S$300 a month
- an emergency fund for surprises, such as running out of stock or paying a supplier whose transfer bounced
- a discretionary fund that pays out only for costs a manager or owner has approved
How to set up a petty cash fund
Follow these five steps to get started, then read the full guide to managing petty cash for day-to-day tips.
- Decide the amount. Look at your small cash spending over the past two to four weeks and set a float that covers it.
- Choose a custodian. Give one person responsibility for the cash and its records.
- Write a petty cash policy. Set out what the fund can pay for and the maximum for each payment.
- Store the cash securely. Keep it in a locked box or drawer that only the custodian can open.
- Set a replenishment trigger. Top up the fund when the balance drops to a set level, such as S$50, or on a fixed schedule.
How to record petty cash
You post entries when you set up the fund and each time you top it up. Here’s how the journal entries work for an S$200 imprest fund.
- Set up the fund. Withdraw S$200 from your business bank account, then debit petty cash S$200 and credit bank S$200.
- Log each payout. Staff spend S$35 on office supplies and S$20 on a courier, and the custodian files both receipts with signed vouchers.
- Replenish the fund. Withdraw S$55 to bring the cash back to S$200, then debit office supplies S$35, debit postage and courier S$20 and credit bank S$55.
- Check the bank side. Once the S$55 withdrawal appears on your statement, reconcile your bank account so it matches the entry.
Your petty cash account still shows S$200, because only the expense accounts changed. The Inland Revenue Authority of Singapore (IRAS) also sets how long you keep receipts.
Under IRAS record-keeping rules, companies must keep records and source documents for at least five years from the relevant Year of Assessment.
Petty cash vs cash on hand
Petty cash is the small float you set aside for minor purchases. Cash on hand is all the cash your business can access immediately, including petty cash, till floats and bank balances.
That makes petty cash one slice of your cash on hand.
Petty cash risks and controls
Cash is easy to spend and hard to trace, so petty cash carries a few risks. The main ones are:
- theft or loss, since notes and coins leave no digital trail
- missing receipts, which leave gaps in your records and weaken tax claims
- overspending, when small payouts add up unnoticed
- admin time spent counting cash and chasing receipts
Simple controls keep these risks in check. Good practice includes:
- one custodian who is accountable for the fund
- a receipt or voucher for every payout, signed by the person who took the cash
- a per-payment limit, such as S$50, written into your policy
- regular spot counts, where cash plus receipts should equal the fund balance and match the log
Alternatives to petty cash
Digital payments can handle many costs that once needed a cash box. Options to consider include:
- PayNow transfers from your business account to suppliers who accept them
- company debit cards with a set spending limit for each staff member
- prepaid cards loaded with a fixed amount for recurring small costs
- staff expense claims, where employees pay first and you reimburse them by bank transfer
A hybrid approach often works well: keep a small float for cash-only vendors and move everything else to digital payments. Each digital payment leaves a bank record, so there are fewer receipts to chase.
Keep petty cash on track with Xero
Spend less time chasing receipts when petty cash sits in the same place as the rest of your books. In Xero, you can set up petty cash as its own account and attach a photo of each receipt to its transaction.
Top-ups are just as tidy, because Xero’s bank reconciliation tools match them against your bank feed. Pick the plan that suits your business and get one month free.
FAQs on petty cash
Here are quick answers to common questions about petty cash in Singapore.
How much petty cash should a business keep?
Keep enough to cover two to four weeks of your usual small cash spending, based on your own records. If you’re topping up every few days, raise the float; if cash sits untouched for months, lower it.
Is petty cash an asset or an expense?
The cash in the fund is an asset, and the things you buy with it are expenses. If a count comes up short with no receipt to explain it, record the gap as an expense in a cash shortage account.
Can you claim GST on petty cash purchases?
Yes, if your business is registered for Goods and Services Tax (GST) and the purchase meets the IRAS input tax conditions. You’ll need a valid tax invoice, or a simplified tax invoice when the purchase is S$1,000 or less including GST.
Are petty cash expenses tax deductible?
They usually are, as long as each expense was wholly and exclusively incurred in producing your business income. The IRAS guide to deductible business costs explains what qualifies, and personal spending paid from petty cash doesn’t count.