How is the account Cash Short and Over used?

Definition of Cash Short and Over Account

The account Cash Short and Over is an income statement account (within a company's general ledger) in which shortages or overages of cash are recorded. The Cash Short and Over account might be used by:

  • A bank to record daily differences (if any) between a teller's actual cash at the end of the day versus the expected amount of cash based on checks cashed, deposits received, etc.
  • A company to record unexplained differences arising when a company's petty cash fund is replenished

The account Cash Short and Over provides a way to monitor employees' cash handling proficiency.

Generally, the amounts in the account Cash Short and Over are so small that the account balance will be included with other insignificant amounts reported on the income statement as Other Expenses.

Example of How the Account Cash Short and Over is Used

Let's illustrate the Cash Short and Over account with the petty cash fund. Assume that the company has a petty cash fund of $100 and its general ledger account Petty Cash reports an imprest balance of $100. Let's now assume that when the petty cash fund is replenished, there is $6.00 on hand and there are $93.00 of petty cash vouchers. This indicates a shortage of $1.00.

Using the above information, the journal entry to replenish the petty cash fund will include a credit of $94.00 to the account Cash: Checking Account. (This is the amount of the company check that will be cashed to get the cash in the petty cash fund back to the imprest general ledger amount of $100.) The debits will be the accounts and amounts shown on the petty cash receipts, which total $93. To get the journal entry to balance, a debit of $1 is recorded in Cash Short and Over.

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