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

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

Answer: (A)

Petty cash represents cash kept on hand for small, incidental expenses that the company will pay out in the near term. Because you own this cash and expect to use it, it sits on the balance sheet as a current asset, often in a separate petty cash or cash-on-hand account. It isn’t a liability, since there’s no obligation to pay someone else from this fund, and it isn’t equity, which reflects the owners’ claim on the business after liabilities. It also isn’t revenue, which is income earned from operations.