A Debit Journal Entry To The Cash Short And Over Account Is Used To Record A Cash Shortage

Cash Short And Over Account is an Income Statement Account recorded in case of cash discrepancy, i.e., there is a disagreement between actual cash in hand and recorded cash in the ledger.

This statement is “True”, as when there is a case of Cash Shortage, then it is a loss to the company’s business as actual cash received is less than the recorded one. So, it is an expense / loss which is represented by a debit in the journal entry. As cash is decreasing, so we credit it in recording the entry. As the amount of such shortage is very small, so we recorded it in Income Statement under the category “Other Expenses”.

On the other hand, when actually excess cash is received as compare to the recorded cash received, then it is a revenue account for the business. As the cash account is increasing, so we debit it in recording cash overage journal entry. The excess amount received by the cashier of the company is overpayment which belongs to the rights or ownership of customer, so it will be returned to customer as soon as possible.