Petty cash is a small amount of company cash kept on site to pay for small, everyday costs that are not worth a bank transfer: courier fees, office water, stationery, a parking fee, a small repair. For a UAE small business the simplest way to run it is the imprest system. You set a fixed float, for example AED 2,000, one person holds it, every payment out of it gets a voucher and a receipt, and once a month you count the cash and top it back up to the float with exactly the amount that was spent. This guide gives a one-page petty cash policy, the fields a petty cash voucher needs, a worked month in AED, the journal entries, the VAT rules (including the new cash-payment rule in force since 1 October 2026) and the signs that petty cash is leaking. It is general information, not legal or tax advice; confirm your own position with the Federal Tax Authority (FTA) or a registered tax agent.
What is the imprest system for petty cash?
Under the imprest system the petty cash box always holds a fixed total: cash plus receipts. If the float is AED 2,000 and staff have spent AED 600, the box should hold AED 1,400 in cash and AED 600 in receipts. At the top-up you take the receipts out, record them as expenses, and put AED 600 of new cash in. The box is back to AED 2,000 in cash.
This gives you three things:
- A fixed limit. Petty cash can never lose more than the float between two counts.
- A built-in check. Cash plus receipts must always equal the float. Any gap is visible at the count.
- One entry per top-up. The top-up amount equals the receipts, so the bank pays out exactly what was spent.
Topping up with a round number whenever the box runs low makes it impossible to tell what was spent and what is missing.
How big should the petty cash float be?
Big enough for about a month of small spending, and no bigger. Take the average monthly cash spending of the last two or three months and round up. If the float runs out after a week, raise it or top up weekly. If half of it is still in the box at month-end, lower it. A bigger float is more cash to lose.
What should a petty cash policy include?
Write it on one page, have the custodian sign it, and keep it with the box. The table is a starting template.
| Policy item | What to write | Example |
|---|---|---|
| Float | The fixed amount | AED 2,000 |
| Custodian | One named person, plus one named backup for leave | Office manager; backup: accountant |
| Where it is kept | A locked cash box in a locked drawer or safe | Safe in the finance office |
| Limit per payment | The most one payment can be | AED 500 |
| Approval | Who approves payments above a lower amount | Manager signs anything over AED 200 |
| Allowed uses | The kinds of costs petty cash is for | Courier, stationery, refreshments, cleaning supplies, small repairs, parking |
| Not allowed | What must never come out of petty cash | Salaries or advances, personal loans, IOUs, supplier invoices above the limit, cashing personal cheques |
| Receipts | What every payment needs | A voucher signed by the person paid or the spender, plus the original receipt or tax invoice |
| Missing receipt | What happens if there is none | Voucher with reason, approved by the manager; rare, and listed at the count |
| Top-up rhythm | When the box is counted and topped up | Last working day of each month, or when cash falls below AED 500 |
| Surprise counts | Who counts without notice | Owner or accountant, at least once a quarter |
Two rules matter more than the rest. One custodian: if three people can open the box, nobody is responsible for a shortage. No IOUs: a staff advance is a loan and goes through payroll, not a slip of paper in the cash box.
What fields does a petty cash voucher need?
A voucher is the internal record of one payment. Use a pre-numbered pad or a numbered form, so a missing number is easy to spot.
| Field | Why it matters |
|---|---|
| Voucher number (pre-printed, in sequence) | Gaps show missing vouchers |
| Date paid | Matches the receipt and the books |
| Paid to | The shop, supplier or person who received the cash |
| What it was for | Picks the expense category |
| Amount in AED, in figures and words | Harder to alter later |
| Expense category | Faster recording |
| VAT on the receipt and the supplier's TRN | Decides whether input VAT can be claimed |
| Receipt attached: yes or no | A "no" needs a reason and an approval |
| Signature of the person who received the cash | Proof the money left the box |
| Approved by (above the approval limit) | Shows it was authorised |
Staple the original receipt to the voucher. A photo on someone's phone is not a record until it is saved with the voucher.
How do you count and top up petty cash each month?
Do it on the same day each month, with the custodian and one other person present.
- Count the cash in the box, note by note.
- Add up the vouchers since the last top-up and check the sequence has no gaps.
- Check cash plus vouchers equals the float. Any difference is an overage or a shortage.
- Record each voucher as an expense in the books, with the VAT split out where there is a valid tax invoice.
- Record any difference as a cash shortage or overage, with a note.
- Transfer the top-up from the bank to petty cash: float minus cash counted.
- Sign and file the count sheet with the vouchers.
Worked example: one month of petty cash in AED
A Dubai design studio runs a float of AED 2,000. In October 2026 the custodian paid out six vouchers.
| Voucher | Date | Paid to / for | Category | Amount paid (AED) | VAT on a valid tax invoice (AED) | Net cost (AED) |
|---|---|---|---|---|---|---|
| PC-041 | 2 Oct | Supermarket, water and coffee | Office supplies | 157.50 | 7.50 | 150.00 |
| PC-042 | 6 Oct | Courier, client documents | Postage and courier | 84.00 | 4.00 | 80.00 |
| PC-043 | 12 Oct | Stationery shop | Office supplies | 231.00 | 11.00 | 220.00 |
| PC-044 | 15 Oct | Delivery driver tip (no receipt, approved) | Sundry | 50.00 | 0.00 | 50.00 |
| PC-045 | 21 Oct | Cleaning supplies | Cleaning | 115.50 | 5.50 | 110.00 |
| PC-046 | 27 Oct | Plumber, not VAT-registered | Repairs | 300.00 | 0.00 | 300.00 |
| Total | 938.00 | 28.00 | 910.00 |
On 31 October the count looks like this:
| Petty cash count, 31 October 2026 | AED |
|---|---|
| Float | 2,000.00 |
| Less: vouchers paid | (938.00) |
| Cash that should be in the box | 1,062.00 |
| Cash counted | 1,052.00 |
| Shortage | (10.00) |
| Top-up needed (float minus cash counted) | 948.00 |
The top-up of AED 948.00 is the AED 938.00 of vouchers plus the AED 10.00 shortage. After it, the box holds AED 2,000.00 in cash again. A shortage of AED 10 in a month is usually change given wrongly. If it repeats, or grows, look at the warning signs further down.
What are the journal entries for petty cash?
Petty cash is its own cash account in the chart of accounts, separate from the bank. Three kinds of entry cover it.
1. Setting up the float. Cash moves from the bank to the box. It is a transfer, not an expense.
| Account | Debit (AED) | Credit (AED) |
|---|---|---|
| Petty Cash | 2,000.00 | |
| Bank | 2,000.00 |
2. Recording the month's vouchers. Each voucher goes to its expense category, recoverable VAT goes to the VAT account, and the shortage goes to its own line. You can post one entry per voucher or one summary entry; the totals are the same.
| Account | Debit (AED) | Credit (AED) |
|---|---|---|
| Office supplies (150.00 + 220.00) | 370.00 | |
| Postage and courier | 80.00 | |
| Cleaning | 110.00 | |
| Repairs and maintenance | 300.00 | |
| Sundry expenses | 50.00 | |
| VAT recoverable (input VAT) | 28.00 | |
| Cash shortage | 10.00 | |
| Petty Cash | 948.00 |
3. The top-up. Another transfer from the bank. The Petty Cash account is back at AED 2,000.00.
| Account | Debit (AED) | Credit (AED) |
|---|---|---|
| Petty Cash | 948.00 | |
| Bank | 948.00 |
The float itself is never an expense. Only the AED 920.00 of costs and shortage reach the profit and loss account; the AED 28.00 goes to the VAT account.
If you change the float later, post the difference as another transfer: Dr Petty Cash, Cr Bank to raise it; the reverse to lower it.
Can you claim input VAT on petty cash purchases?
Only when the purchase is backed by a valid tax invoice from a VAT-registered supplier, it is for your business, and it is not a blocked cost. A till slip with no TRN does not support a claim. Neither does a receipt from a supplier that is not registered, like the plumber in the example. The VAT is still part of the cost; you just cannot recover it.
When a VAT-registered business buys something for AED 10,000 or less, the supplier may issue a simplified tax invoice instead of a full one, and most petty cash receipts from shops are of this kind. Check that it shows the words "Tax Invoice", the supplier's name, address and TRN, the date, what was bought, the total and the VAT. Our UAE tax invoice requirements guide lists the full fields.
Some costs are blocked even with a tax invoice, such as entertainment of people who are not employees and staff benefits for private use, with narrow exceptions. If petty cash pays for hospitality, check the treatment with your tax agent.
The new cash-payment rule (Art. 54(3))
Rule: Cabinet Decision No. 149 of 2026 added Article 54(3) to the VAT Executive Regulations, in force from 1 October 2026. Input VAT cannot be recovered on a supply above a value set by the Minister of Finance when it is paid, or intended to be paid, in cash. As of 31 October 2026 we could not find a published Ministerial Decision setting that value, and adviser alerts from Grant Thornton and others still describe it as forthcoming. Check the Ministry of Finance and FTA sites for the current figure.
A box with a limit of a few hundred dirhams per payment is unlikely to be caught. The risk is someone paying a larger supplier invoice in cash. Until the threshold is published, assume a large cash purchase made now may not support a VAT claim. One commentator notes the rule refers to the value of the supply, not just the cash part, so paying part of a large invoice in cash may also be caught. Pay supplier invoices by bank transfer or card, and keep petty cash for small items.
The FTA has also issued Decision No. 13 of 2026 on checks before deducting input tax, effective 1 October 2026. According to EY's summary, it asks businesses to give cash payments special attention and make sure they have a commercial reason and are documented, with an exemption for supplies below AED 10,000 unless that supplier's total passes AED 100,000 over 12 months. A signed voucher with the receipt attached is that documentation.
The full list of October 2026 changes is in our guide to the UAE VAT Executive Regulations changes.
Records: Keep vouchers, receipts and count sheets. UAE VAT records are generally kept for at least five years from the end of the tax period, and Corporate Tax records for seven years after the end of the tax period they relate to.
What are the signs that petty cash is leaking?
Most petty cash losses are small and slow. These are the patterns to look for at each count.
| Sign | What it can mean | What to do |
|---|---|---|
| Shortages every month, even small ones | Cash taken in small amounts, or careless change | Surprise count; check who had access |
| Gaps in voucher numbers | Vouchers removed or destroyed | Ask for the missing numbers; use a bound pad |
| Many payments just under the approval limit | Splitting to avoid approval | Review the payees; lower the limit or approve by payee |
| Handwritten receipts from the same few "suppliers" | Made-up receipts | Call the supplier; require printed receipts with a TRN |
| IOU slips counted as cash | Unapproved loans to staff | Ban IOUs; process advances through payroll |
| Round-number top-ups that do not match vouchers | Imprest not being followed | Top up only by float minus cash counted |
| Only the custodian ever counts | No independent check | Someone else counts at least quarterly, unannounced |
How does petty cash fit into the month-end close?
Count and top up before you close the month, so small expenses land in the right month. After the top-up, the Petty Cash balance in the books and the cash in the box should both equal the float. This is the same check as a bank reconciliation, with a cash count in place of the statement. The rest of the close is in our month-end close checklist.
From the platform: Every new Staks organisation's chart of accounts includes a Petty Cash account, and on Bank & Cash you can add more cash accounts (for example "Office cash box") with an opening balance and a "Balance as of" date. Set-up and top-ups are recorded with Transfer between your bank and the cash account, posted once as Dr cash, Cr bank, so they are not counted as income or spending. On an expense marked Paid, choosing the Cash payment method fills "Paid Through" with the account that method is linked to (Petty Cash by default), and the expense posts Dr its category, Cr that account on the expense date; an expense saved with no Paid Through account lands on the main Bank Account, so check it. Its page shows money in, money out and a running balance to compare with your count. Two limits to know: expenses post their gross amount with no VAT split, so to recover input VAT on a purchase, record it as a vendor bill with tax (bills are on Growth) and pay it from the cash account; and there is no reconciliation screen, so the count and sign-off are done by you. Receipt photos and PDFs attach to each expense, and the Staks Agent can read a receipt into a draft expense for you to confirm. Bank & Cash is on every plan and works in your base currency.
Frequently asked questions
Who should hold petty cash in a small company?
One named person who does not approve their own payments. Often an office manager holds the box and the owner approves. Name a backup for leave and count the box when it changes hands.
What if an employee pays for something from their own pocket?
That is a reimbursement, not petty cash. Record it as an expense paid by the employee and pay them back, either from petty cash against the receipt or through their next payroll. Keep it out of the box as an IOU.
Should petty cash be used to pay suppliers?
Only small, one-off suppliers within the per-payment limit. Regular suppliers and anything larger should be paid by bank transfer or card. That gives you proof of payment, keeps the float small, and avoids the input VAT risk under Article 54(3) once the cash threshold is set.
What do I do with a shortage I cannot explain?
Record it as a cash shortage expense with a note, so the books match the count. Do not cover it from the custodian's pocket without a written policy that says so, and do not hide it inside another expense. If shortages repeat, do a surprise count and change who has access.
Related reading
- How to do a bank reconciliation for a small business in the UAE
- Month-end close checklist for small businesses in the UAE
- UAE VAT Executive Regulations changes in 2026
- How to track business expenses without a bookkeeper
Set a fixed float, give it one custodian, put a voucher and a receipt behind every payment, and count and top up on the same day each month. Start a 14-day free trial of Staks to keep petty cash as its own account next to your bank, with every expense posted to the account it was paid from.