Over and short—commonly referred to as “cash over short”—is an accounting term that highlights a discrepancy between reported figures from a company’s sales records and its audited figures. It is also the name of an account a company maintains in its general ledger to track these discrepancies.
This concept is particularly relevant to cash-intensive businesses within the retail and banking sectors, including those managing petty cash. For instance, when cashiers or bank tellers give too much or too little change, businesses register a “cash short” or “cash over” position by the day’s end.
Key Takeaways
- In accounting, over and short—or “cash over short”—indicates a disparity between a firm’s reported and audited figures.
- This term also represents the account where the firm records such cash discrepancies.
- Over and short issues are most common in the retail and banking sectors.
An Example of Over and Short
Imagine I work as a cashier at a sporting goods store. A customer buys a $95 pair of yoga pants. While I correctly ring up $95, I miscount the cash received and inadvertently accept $96. Neither the customer nor I notice the error. The accounting system will record $95 in sales but $96 in collected cash. The one-dollar difference is put into the cash-over-short account. Here, the journal entry for this sale would debit cash for $96, credit sales for $95, and credit cash over short for $1.
Similarly, for transactions where a cash shortage occurs, say I receive $94 instead of $96, the cash account is debited for $94, the sales account is credited for $95, and cash over and short is debited for $1.
What Causes Cash-Over-Short Incidents?
While internal tampering can occasionally cause discrepancies, simple human errors are the usual culprits. For example, an employee could make mistakes while ringing up a sale or miscounting cash, leading to a discrepancy between the sales price of the merchandise, the collected amount, and what’s recorded in the accounting system.
The Function of a Cash-Over-Short Account
Businesses should document cash variances in a centralized, accessible account. The cash-over-short account should be classified under the income statement rather than an expense account, as recorded errors can affect a company’s profits.
Using data from the cash-over-short account, companies can investigate the sources of discrepancies and implement better procedures, controls, and employee training to minimize future occurrences. Thus, this account primarily serves as a detective control, helping to identify and address any issues, including fraudulent activity, within a company’s processes.
Related Terms: general ledger, petty cash, cash shortages, income statement.
