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What is Cash Over and Short? - Definition & Examples

Instructor: Deborah Schell

Deborah teaches college Accounting and has a master's degree in Educational Technology.

It is difficult to manage money perfectly when you are receiving cash or providing change to customers. In this lesson, you will learn about cash over and short situations.

What Is Cash Over and Short?

Julia is responsible for administering the petty cash fund for her employer, Deia's Drafting Company. When she reconciled the petty cash at the end of the month, Julia noted that she had $8 less in her fund than she should have. She's not sure how this could have happened and what the next steps are. Let's see if we can help Julia with this problem.

Businesses that deal with cash such as banks or retail stores could find themselves in a situation where the amount of cash collected differs from the amount its records show it should have collected. Since cashiers or bank tellers give change to customers and complete cash transactions, there is a possibility that he/she could make an error and give too much or too little change. If this occurs, the business will have a cash short or cash over situation.

Recording Cash Over and Short

A company keeps track its cash over and short or the amount by which its actual cash amount differs from its records in its general ledger which contains account names and dollar amounts of all of the company's account. The cash over and short account appears on a company's income statement which is the financial statement that summarizes the company's revenue or the amount of money it earned from selling its goods and services and its expenses or the cost of earning the revenue. The amount a company is over or short will impact its net income (revenues less expenses).

Businesses such as Deia's Drafting could also have petty cash funds which represent small amounts of money that a business keeps on hand for out-of-pocket expenses such as coffee for meetings and small office expenses. Before Julia can reimburse her co-workers for expenses, they must provide her with a receipt for their expenses.

Calculating Cash Over and Short

Let's assume that Julia compares the actual petty cash on hand with the amount of cash recorded in the general ledger every month. The amount recorded in the general ledger represents the balance at the beginning of the month plus all transactions during the month which involved cash.

When Deia's Drafting Company established its petty cash fund, it gave Julia $100 for the petty cash fund and recorded $100 in the general ledger. When Julia reconciles her petty cash fund at the end of May, she finds that the fund contains $64 in cash and $27 of receipts or $91 in total ($64+$27). When she compares the general ledger amount of $100 with the $91 of petty cash on hand, she determines that $9 ($100 - $91) is missing from the fund. This represents a cash short situation.

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