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

Question

Quizplus · Accepted Answer

The Cash Over and Short account is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and/or from errors in processing petty cash transactions. It tracks the discrepancies between actual cash and the cash recorded in the accounting system. This account is necessary because it reflects the accuracy of cash handling and helps to identify and correct errors. Therefore, B is the correct answer as it gives an accurate description of the purpose and use of the Cash Over and Short account. A, C, D, and E are incorrect because they do not accurately describe the account.

The Cash Over and Short Account