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    Thursday
    Nov152012

    What is the cash over and short account?

    The cash over and short account is an account in the general ledger. The account stores the amount by which the actual ending cash balance differs from the beginning book balance of cash on hand, plus or minus any recorded cash transactions during the period.

    The primary use of the cash over and short account is in cash-intensive retail or banking environments, as well as for the handling of petty cash. In these cases, cash variances should be stored in a single, easily-accessible account. This information is then used to track down why cash levels vary from expectations, and to eliminate these situations through the use of better procedures, controls, and employee training. Thus, the account is used as the basis for a detective control.

    The cash over and short account is an excellent tool for tracking down fraud situations, especially when tracked at the sub-account level for specific cash registers, petty cash boxes, and so forth. An examination of the account at this level of detail may show an ongoing pattern of low-level cash theft, which management can act upon. For example, fraud situations may be traced back to the people directly responsible for a cash register or petty cash box.

    The cash over and short account is an expense account, and so is usually aggregated into the "other expenses" line item in the income statement. The balance in the account tends to be quite small.

    As an example of how the cash over and short account operates, a controller conducts a monthly review of a petty cash box that should contain a standard cash balance of $200. He finds that the box contains $45 of cash and $135 of receipts, which totals only $180. Therefore, $20 of cash is missing. This cash shortfall is recorded as a debit to the cash over and short account (which is an expense) and a credit to the petty cash or cash account (which is an asset reduction).

    Alternatively, if there had been too much cash in the petty cash box (a rare condition indeed!), the entry would be reversed, with a debit to cash and a credit to the cash over and short account.

    Related Topics

    How to reconcile petty cash 
    Petty cash accounting 
    What is a petty cash system? 
    What is a petty cash voucher? 
    What is the imprest system? 

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