A cash over normally occurs in a retail accounting environment when the sales are reconciled to the cash receipts in the register at the end of the business day. If the cash in the register is more than the sales there is said to be a cash over. Likewise, if the cash is less than the sales the cash is said to be short.
Cash overages are normally recorded in a separate income statement expense account often referred to as the cash over/short account.
Cash Over Journal Entry Example
Suppose a retail business starts each day with a cash balance of 200 in the cash register. During the day sales of 1,400 are entered into the register, and a cash count at the end of the day shows cash of 1,614 as summarized below.
| Cash count | 1,614 |
| Less opening fund | 200 |
| Amount banked | 1,414 |
| Sales on cash register tape | 1,400 |
| Cash over | 14 |
The reconciliation shows that there is a cash over of 14.
To record the cash register overage the business needs to enter the cash over of 14 as part of the journal entry used to record the sales as follows.
| Account | Debit | Credit |
|---|---|---|
| Cash | 1,414 | |
| Cash over/short | 14 | |
| Sales revenue | 1,400 | |
| Total | 1,414 | 1,414 |
The cash overage/shortage account is an expense account in the income statement of the business.
The Accounting Equation
The accounting equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the owners equity of the business. This is true at any time and applies to each transaction.
For this transaction the accounting equation is shown in the following table.
In this case one balance sheet asset (cash), has been increased by 1,414 when the cash is banked. On the other side of the accounting equation the sales of 1,400 plus the cash register overage of 14 increase the net income, retained earnings, and therefore owners equity in the business by the same amount of 1,414.
Popular Double Entry Bookkeeping Examples
The cash overage journal entry is one of many bookkeeping entries used in accounting, discover another at the links below.
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Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.