What is a petty cash fund?

A petty cash fund is used to handle small, routine expenses that are often too minor to justify writing a check or processing a formal payment. This fund allows a business to manage day-to-day operational costs efficiently. For instance, if an employee needs to purchase office supplies or cover the cost of small repairs, they can draw from the petty cash fund without going through lengthy paperwork or approval processes. This way, financial transactions remain simple and streamlined for minor expenditures.

Other options represent different financial concepts: a reserve for major business investments involves larger financial commitments and is not suited for everyday expenses; a long-term savings account typically refers to funds set aside for future use, often in a bank, which doesn't serve the purpose of easily accessible cash for immediate needs; and a financial aid fund for employees could relate to assistance programs, which again do not align with the specific function of a petty cash fund.