The purpose of petty cash is to pay for minimally priced business transactions in a cost effective way. Petty cash can only be used for transactions that are not reported to the Internal Revenue Service.
Petty cash should be set up as an individual fund with all transaction requests and receipts and replenishment of funds being properly recorded for auditing purposes. A fund custodian is appointed to maintain and reconcile the account.
Vouchers are used to request cash from a petty cash fund. Vouchers must be pre-approved before cash can be disbursed. Receipts for purchases are matched up to voucher requests and maintained for account reconciliation.