Where petty cash appears in the balance sheet

Petty cash appears within the current assets section of the balance sheet. This is because line items in the balance sheet are sorted in their order of liquidity. Since petty cash is highly liquid, it appears near the top of the balance sheet.

However, the balance in the petty cash account is so small that it is rarely listed on the balance sheet as a separate line item. Instead, it is aggregated with the other cash accounts of a business into a single cash line item (this form of presentation is known as a classified balance sheet).

The amount listed in the petty cash account is almost always overstated, since the various petty cash custodians are always disbursing petty cash in exchange for receipts for expenses incurred. In order to present a petty cash number that is more accurate, you could replenish all of the petty cash boxes just prior to the balance sheet date, and record all related petty cash expenses at the same time. However, the amount of cash (and expenses) involved is quite small, and so the absolute accuracy of the petty cash balance is immaterial to the results and financial position presented in the financial statements. Consequently, petty cash balances are rarely updated just to improve the accuracy of the financial statements.