Petty cash consists of

• A. A sum of money set aside for making large purchases.
• B. A separate bank account.
• C. A revolving line of credit.
• D. A sum of money set aside for making small cash purchases on a contingency basis.

Answer: (D)

Petty cash is a small, pre-funded amount of cash kept on hand to cover minor, everyday purchases when writing a check or using a card isn’t practical. It’s for contingency-type, small expenditures like office supplies or postage, so routine items can be bought quickly without delays. It’s not a separate bank account, nor a revolving line of credit; the fund sits in a locked box under a custodian’s control, and when funds are spent, receipts are kept and the purse is replenished back to its original amount. Large purchases flow through the regular procurement process, not the petty cash fund.