Petty Cash Records for a Small Business

What a petty cash fund is

IRS Publication 583 puts it simply: a petty cash fund lets you make small payments without writing checks for small amounts, and each time you pay from it you make out a petty cash slip and attach it to the receipt. The same publication advises paying everything else by check so the expense is documented by the bank. Petty cash is the exception to that rule, which is why it gets its own records.

Nearly every petty cash fund is run as an imprest fund. The idea is one fixed number. You decide the fund holds $300.00, cash it from the business account, and from then on the box must always account for $300.00: partly as cash, partly as vouchers for cash that went out. The Washington State Auditor's manual for local governments states the test at replenishment: the balance remaining in petty cash plus the replenishment voucher equals the authorized balance. When the cash runs low, you write one check for the total of the vouchers, the fund is back to $300.00, and the expenses are recorded in the books at that moment. Because the total never changes, a shortage is visible the instant someone counts.

The log columns

The log is the fund's running statement. One line per payment, one line per replenishment, and the balance after each line:

The purpose column is the one that satisfies the IRS. Publication 463 says records are adequate when they show the amount, the date, the place and the essential character of the expense, and for a business purpose that is not obvious, the log is where it is written. The petty cash log template has these columns and totals the balance for you.

Vouchers and receipts

A voucher is the slip Publication 583 calls a petty cash slip: date, amount, purpose, who received the cash, who approved it, and the voucher number. The store receipt is stapled to it. The two are not the same thing. The receipt proves the purchase happened; the voucher proves who took the cash out of the box for it and that someone approved it. For a reimbursement, where an employee paid first and claims the money back, the voucher is the reimbursement form and the receipt is the employee's.

When there is no receipt, a signed voucher is the record. The IRS exception in Publication 463 for travel, gift and transportation expenses says documentary evidence is not required when an expense other than lodging is less than $75, or for a transportation expense for which a receipt is not readily available, such as a parking meter or a bus fare. You still must be able to show the amount, date, place and business purpose, so the voucher carries them. The practical policy for a small business is shorter than the rule: a receipt for everything that produces one, a voucher for everything. If a receipt is lost, the receipt generator does not replace it; it is for receipts you issue to your own customers. Write a voucher, have it signed, and move on. What receipts to keep for business expenses covers the wider rules for receipts outside the cash box.

Counting and replenishing

1. Count the cash in the box and list the notes and coins.
2. Add up the vouchers since the last replenishment and check that each has its receipt or a signature.
3. Compare. Cash plus vouchers should equal the fund amount. A difference is an "over" or "short" entry in the log with its own line, not a quiet adjustment. The Washington State Auditor's manual says independent checks should be done on a surprise basis, not scheduled with the custodian.
4. Write one check from the business account for the voucher total, payable to the custodian or to cash, and cash it into the box. The fund is back at its full amount.
5. Post the expenses. The replenishment check is split across expense accounts according to the vouchers: postage, office supplies, travel, meals. This is the moment the expenses enter the books; until then they are only in the log.
6. File the bundle: the count sheet, the vouchers with receipts and a copy of the check, labeled with the date. Keep it with the year's other supporting documents.

Replenish when the cash is low or at month end, whichever comes first. A month-end replenishment also means every month's expenses land in that month's books.

Who holds the key

One person, the custodian, holds the box and the key and signs for the fund. The Washington State Auditor's manual says to appoint one custodian per fund who is independent of invoice processing, and to keep the cash in a secure place such as a locked drawer or box. In a very small business that may be the owner. If it is an employee, the owner or another person does the counts and signs the replenishment check, so that no single person both pays out cash and approves the refill. When the custodian changes, count the fund together, both sign the count sheet, and start a new page in the log.

What the IRS says about keeping the records

Publication 583 says everyone in business must keep records and that supporting documents include sales slips, paid bills, invoices, receipts, deposit slips and canceled checks. Petty cash vouchers and the log are supporting documents for the expenses in the replenishment check. Its table of limitation periods sets how long to keep them:

Publication 463 adds, for the expenses it covers, that records must be kept as long as they may be needed for the administration of the tax code, and generally for 3 years from the date the return that claims the deduction is filed. This page quotes those rules; how they apply to a specific return is a question for a tax professional.

A worked month

A $300.00 fund at the start of November. Seven payments, each with a voucher, then the month-end replenishment:

The month-end count found $165.16 in cash and 7 vouchers totaling $134.84; together $300.00, which matches the fund. The $134.84 check is posted to postage ($12.40), meals ($18.75), travel and parking ($31.00), office supplies ($41.19) and delivery ($31.50). None of the seven purchases reached the $75 line, but six of them produced a receipt anyway, and the parking voucher carries the date, the garage and the reason. Employees who spend their own money for larger items use the expense report template instead, so that petty cash stays small.

Frequently asked questions

Sources

• IRS Publication 583: Starting a Business and Keeping Records (why to keep records; supporting documents such as sales slips, paid bills, invoices, receipts, deposit slips and canceled checks; a petty cash fund allows small payments without writing checks, with a petty cash slip for each payment attached to the receipt; paying by check to document expenses; the period of limitations table of 3 years, 6 years, 7 years and 4 years for employment taxes)
• IRS Publication 463, chapter 5 Recordkeeping (documentary evidence such as receipts, canceled checks or bills; the exception for expenses other than lodging under $75 and for transportation expenses where a receipt is not readily available; evidence is adequate if it shows amount, date, place and essential character of the expense; records kept as long as needed, generally 3 years from filing)
• Washington State Auditor, BARS GAAP Manual: Imprest, petty cash and other revolving funds (one custodian independent of invoice processing; cash kept in a locked drawer or box; expenditures recorded when the fund is replenished to its authorized balance; replenishment supported with receipts showing date, recipient, purpose and amount; the remaining balance plus the replenishment voucher equals the authorized balance; independent checks on a surprise basis)

General information based on the sources above, not tax, legal or financial advice.

Written by Tobias. Updated November 3, 2026.