What is Petty Cash Fund?
A petty cash fund is a small amount of cash kept on hand by a business to pay for minor or incidental expenses, such as office supplies, courier fees, and local taxi fares. It is usually operated on the imprest system, in which the fund is replenished periodically back to a fixed amount.
How It Works
- Establish a fixed petty cash float (for example, SAR 2,000) by withdrawing cash from the bank.
- Record disbursements on petty cash vouchers and keep supporting receipts.
- Reconcile the fund at the end of each period: cash on hand plus vouchers should equal the float.
- Replenish the fund by issuing a new bank cheque equal to the total vouchers, restoring the original float.
Saudi Context
Saudi SMEs and branches often maintain small petty cash floats for daily expenses. Under ZATCA’s VAT rules, businesses can only claim input VAT on petty cash purchases if a compliant tax invoice is obtained, so most petty cash items are charged net of VAT in practice.
Example
A Riyadh company sets a SAR 2,000 petty cash float. At month-end SAR 1,650 has been spent on supplies and couriers; SAR 350 remains in the box. A SAR 1,650 cheque restores the float to SAR 2,000.