Blog Introduction: If you’re new to accounting, recording a cash short journal entry may seem intimidating at first.
But understanding how to record this type of journal entry is essential for properly tracking and balancing your finances.
In this blog post, we’ll break down how to record a cash short journal entry so that you can feel confident in tracking the financials of your business.
What is a Cash Short Journal Entry?
A cash short journal entry records any discrepancies between the amount of cash expected in your business’s accounts and the amount actually present.
It can also be used when an employee must take money from the business’s accounts for personal reasons.
You must adjust your books by recording a cash-short journal entry to balance out these discrepancies.
Recording the Cash Short Journal Entry
To record a cash short journal entry, you will need two accounts—a “cash over/short account” and a “cash account.” The cash over/short account will be used to register any excess or deficiency in actual cash versus what was expected in your accounts.
This means that if there is more money than expected in your accounts, it will be recorded as an increase (debit) in this account; if there is less than expected, it will be recorded as a decrease (credit).
The cash account will be used to track all transactions related to actual monetary funds coming into or leaving your business accounts, making it easier for you to identify any discrepancies between what is expected and what was received or withdrawn from the accounts.
The following example shows how you would record an increase (over) in actual vs. expected funds:
Cash Over/Short Account – Debit $100
Cash Account – Credit $100
This example shows how you would record a decrease (under) in actual vs. expected funds:
Cash Over/Short Account – Credit $200
Cash Account – Debit $200
Making sure that your books are balanced accurately is essential for managing the financial health of your business. To do this successfully, you need to know how to record a cash-short journal entry when needed.
We hope that this blog post has given you some insight into why it’s important to understand the process and how to go about recording one so that you’ll have no trouble managing the financials of your business with confidence!