Question

The Cash Over and Short account:

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

Answer 1

The Cash Over and Short account is used to record the income effects of errors in making change and/or processing petty cash transactions.

Step-by-step explanation:

The Cash Over and Short account is used to record the income effects of errors in making change and/or processing petty cash transactions. Answer B is correct. When a cashier makes a mistake in giving change or managing petty cash, the difference between the expected amount and the actual amount is recorded in the Cash Over and Short account.

For example, if a cashier gives a customer $20 in change instead of $10, the $10 difference would be recorded in the Cash Over and Short account as an income effect of the error.

The Cash Over and Short account can have a debit or credit balance depending on whether there is more cash than expected (debit balance) or less cash than expected (credit balance).