What is finished and short?
Over and short – often called “cash over short” – is an accounting term that indicates a discrepancy between the declared figures of a business (from its sales records or receipts) and its audited figures. The term is also the name of an account in a company’s general ledger – the cash-over-short account.
This term mainly concerns cash-intensive businesses in the retail and banking sectors, as well as those that have to cash. If a cashier makes a mistake by giving too much or too little change, for example, the company will have a “cash short” or “cash over” position at the end of the day.
Key points to remember
- In accounting, the surplus and the short – or “cash over short” – imply a disparity between the declared figures of a company and its audited figures.
- It is also the name of the account where the company records these cash differences.
- Overruns and losses most commonly occur in retail and banking.
An example of sur and court
Suppose I work as a cashier in a sporting goods store. I sounded a pair of yoga pants for $ 95 for $ 95 correctly, but I counted the money I received for the pants badly. The customer involuntarily gave me $ 96 for the purchase, an error that we failed to detect. The accounting system will display $ 95 in recorded sales but $ 96 in cash collected. The difference of one dollar goes to the cash-over-short account. The journal entry for this sale would debit cash for $ 96, credit sales for $ 95 and short cash credit for $ 1.
The opposite is true for transactions that produce shortages of cash. Suppose the same situation except that I receive $ 94 instead of $ 96 for the sale. Now the money is debited at $ 94, the sales account is credited at $ 95, and the surpluses and balances are debited at $ 1.
What are the causes of Cash-Over-Short incidents?
Internal falsification could lead to the end and the brevity of a business in its accounting. Usually, however, the cause results from simple human error. An employee who incorrectly announces a sale or makes another error, such as a counting error, can generate a disparity between the sale price of the goods, the amount collected and the amount recorded in the accounting system.
The function of a Cash-Over-Short account
A business should record cases of cash flow differences in a single, easily accessible account. This cash-over-short account must be classified as an income statement and not as an expenditure account because the errors recorded can increase or decrease the profits of a company on its income statement.
A business can use data from the cash-over-short account to determine why cash levels are mismatched and try to reduce the number of cash-over-short occurrences by using better procedures, controls, and employee training. Thus, this account is mainly used for detection control – an accounting term for a type of internal control that aims to find problems, including any case of fraud, in a company’s processes.