Petty cash fund is recorded as an ______ on balance sheet.

• A. Asset
• B. Liability
• C. Equity
• D. Revenue

Answer: (A)

Petty cash is cash on hand set aside for small, incidental purchases. Because it represents cash owned by the business that is readily available for use, it is classified as a current asset on the balance sheet. It isn’t a liability (the company doesn’t owe this money to someone), nor is it equity or revenue. In practice, petty cash is shown as a separate line item within current assets or included with cash and cash equivalents, and its balance is replenished from the main cash account as expenses are paid.