Which term describes a small amount of cash kept on hand for minor payments?

• A. Petty Cash
• B. Petty Cash Fund
• C. Cash on Hand
• D. Petty Cash Reserve

Answer: (A)

The concept being tested is the term for a small amount of cash kept inside a business to handle minor, everyday payments without going through the full accounts payable process. This is called petty cash. It’s a designated small cash fund kept on hand, often in a petty cash box, with a custodian approving each small disbursement and receipts or vouchers backing every use. When the fund runs low, it’s replenished from the main cash account, and the replenishment is recorded to keep the books accurate.

Petty cash fund is a closely related phrase that describes the actual source, but everyday language most often uses petty cash to refer to the small cash on hand used for minor expenses. Cash on hand is a broader term for all cash available, not a specifically designated fund for small payments. Petty cash reserve isn’t a standard term in typical practice.