International Association of Accessibility Professionals (IAAP) Certified Administrative Professional (CAP) Practice Exam

What does the term petty cash refer to in an organization?

1. A large fund for major investments

2. A small amount of cash for minor business expenses

3. A fund for employee salaries

4. A type of credit issued to employees

The correct answer is: A small amount of cash for minor business expenses

The term "petty cash" in an organization refers to a small amount of cash that is maintained for the purpose of covering minor business expenses. This can include things such as office supplies, small repairs, or other incidental costs that arise in day-to-day operations. The use of petty cash allows for quick access to funds without the need for extensive paperwork or approvals that typically accompany larger transactions. Petty cash is convenient because it enables employees to swiftly address minor expenses without needing to go through the formal procurement process. Organizations usually establish a petty cash fund with a set limit, and a designated custodian is responsible for managing this fund, ensuring proper documentation and reconciliation of expenditures. In contrast, other options such as a large fund for major investments, a fund for employee salaries, or a type of credit issued to employees do not align with the defined purpose of petty cash, which is specifically intended for small, everyday expenses rather than significant financial commitments or remuneration to staff.