Cash Over and Short Journal Entry
Overview
In accounting, cash over and short journal entry is usually made when the company replenishes its petty cash fund. This is due to the cash remaining and the receipts in the petty cash box may not equal the amount of petty cash fund established.
The amount of the cash overage or cash shortage is usually small. However, the company still needs to account for the cash overage or shortage with a proper journal entry in order to match the balance on the debit with the balance on the credit in the accounting system.
The cash overage or cash shortage may also come from the sale and other expense transactions too. However, to make it easy, we will only look at the petty cash transaction as the journal entry is usually the same. For example, the cash shortage needs the adjustment on the debit side while the cash overage needs the adjustment on the credit side.
Cash over and short journal entry
Cash overage journal entry
When the company has the cash overage in the petty cash fund, it can make the journal entry by debiting the expenses account and crediting the cash over and short account together with the cash account.
| Account | Debit | Credit |
|---|---|---|
| Expenses | $$$ | |
| Cash over and short | $$$ | |
| Cash | $$$ |
Cash shortage journal entry
On the other hand, if the company has a cash shortage in the petty cash fund, it can make the journal entry with the debit of cash over and short account instead.
| Account | Debit | Credit |
|---|---|---|
| Expenses | $$$ | |
| Cash over and short | $$$ | |
| Cash | $$$ |
The cash over and short account is the type of miscellaneous account in the income statement. If its balance is on the debit side, it is usually presented in the miscellaneous expenses. On the other hand, if its balance is on the credit side, it will be presented as miscellaneous revenue instead.
Example
For example, at the end of the month, the receptionist of the company ABC needs to request reimbursement to refill the petty cash fund of $100.
On Jan 31, 2021, the cash remaining and petty cash receipts are as below:
- Remaining cash $20
- Cash receipts for postage $60
- Miscellaneous expense $18
In this case, the cash request for reimbursement will be $80 (100 – 20) and there is a cash shortage of $2 (80 – 60 – 18). So, the journal entry for the cash over and short will be as below:
| Account | Debit | Credit |
|---|---|---|
| Postage expense | 60 | |
| Miscellaneous expense | 18 | |
| Cash over and short | 2 | |
| Cash | 80 |