The Cash Over and Short account:
A) Is used to record the income effects of errors in making change and/or processing petty cash transactions.
B) Can never have a debit balance.
C) Can never have a credit balance.
D) Is not necessary in a computerized accounting system.
E) Is used when the cash account reports a credit balance.

Question

Quizplus · Accepted Answer

The Cash Over and Short account is used to record any differences between the actual cash on hand and the expected cash on hand, due to errors or discrepancies in making change or processing petty cash transactions. These differences can result in either a debit or credit balance in the account. Therefore, options B, C, and E are incorrect. While a computerized accounting system may make it easier to track cash and identify errors, having a Cash Over and Short account is still necessary to accurately reflect the income effects of cash discrepancies.

The Cash Over and Short Account