Excess and shortage cash amount deposit in bank account compulsory

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Kollipara Sundaraiah (Querist)
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31 March 2024 Sir,
A Doctor maintained a private hospital and pharmacy Stores
Cash balance as on dt:30-03-24 rs:40 lacs as per hospital account books and physical verification cash rs:35 lacs
Cash balance as on dt:30-03-24 rs:30 lacs as per pharmacy Stores account books and physical verification cash rs:32 lacs
Question:
Assessess excess and shortage cash amount deposit in bank account as on dt:31-03-24 compulsory.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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31 March 2024 where is the question?

Kollipara Sundaraiah

Kollipara Sundaraiah (Querist)
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02 April 2024 cash balance as per books rs:40 lacs physical verification cash amount rs:35 lacs as per hospital account books cash balance as per books rs:35 lacs and physical verification cash amount rs:30 lacs as per pharmacy business as on dt:31+03-24 doubt: difference amount books vs physical verification adjustment procedure

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 Based on the scenario you've described, where there are discrepancies between the cash balances as per the books and the physical verification, here's how you can address the excess and shortage of cash amounts:

1. **Excess Cash in Hospital Account**:
- As per the books: Rs. 40 lakhs
- Physical verification: Rs. 35 lakhs
- Excess amount: Rs. 5 lakhs

**Procedure**:
- If there is excess cash (more in books than physically counted), it indicates there might be an error in recording or an actual excess.
- You need to deposit the excess cash amount of Rs. 5 lakhs into the bank account.

2. **Shortage Cash in Pharmacy Stores**:
- As per the books: Rs. 30 lakhs
- Physical verification: Rs. 32 lakhs
- Shortage amount: Rs. 2 lakhs

**Procedure**:
- If there is a shortage of cash (less in books than physically counted), it indicates either an error in recording or actual cash has gone missing.
- You should deposit an additional Rs. 2 lakhs into the bank account to cover the shortage.

**Adjustment Procedure**:
- Prepare a journal entry to adjust the cash balances in your accounting records to reflect the physical verification amounts.
- Journal Entry for Hospital Account:
- Debit: Cash (Physical Verification) - Rs. 35 lakhs
- Credit: Cash (Books) - Rs. 40 lakhs
- Credit: Cash Shortage (Expense Account) - Rs. 5 lakhs (if there's an actual shortage)
- Journal Entry for Pharmacy Stores:
- Debit: Cash (Physical Verification) - Rs. 32 lakhs
- Credit: Cash (Books) - Rs. 30 lakhs
- Credit: Cash Excess (Income Account) - Rs. 2 lakhs (if there's an actual excess)

**Compulsory Deposit**:
- It is important to deposit the excess and shortage amounts into the bank account to reconcile your books with the actual physical cash on hand.
- This helps in maintaining accurate financial records and ensures compliance with accounting principles.

**Documentation**:
- Keep records of the physical verification and the adjustment journal entries for audit and compliance purposes.
- It's advisable to consult with a professional accountant or tax advisor to ensure correct treatment of excess and shortage of cash amounts in your specific context and compliance with local regulations.