Hi Experts,
I want to manage my negative cash balance which is 5 lakh. Plz suggest me according to Indian AS.
Ramesh Kr Singh.
18 Replies
Joey Tribbiani
(fdg)
(2010 Points)
Replied 10 June 2011
thats interesting,u have negative cash balance. Am i reading it corrctly.. ????? That means u have spent more cash than u actually had... Are you sure.... I think its more to do with an error in accounting practice..
CA ADITYA SHARMA
(CA IN PRACTICE )
(16719 Points)
Replied 10 June 2011
yes it is not a good accounting practice
Arvind Sharma
(ACA)
(1432 Points)
Replied 10 June 2011
I think Piyush is talking about -ve Cash & Bank balance..., ie there may be Bank Overdraft...
How could it be possible to have -ve cash balance :)
If you are having -ve Bank balance, then you have to show it as Current Liability, and you can not made such entries to show it as aset.
However, you can have cheque received but not deposited.. Refer bank entries after 31st March upto next 4 days...
Chq deposit between this period having date of reporting FY, can be show as debit in accounts and accordingly, you can manage you Bank Bal...
Aparna Raja K.C
(Student)
(520 Points)
Replied 10 June 2011
True... it is not possible to have negative cash balance...
anyway.. u can have a negative bank balance which indicates of bank overdraft...
it is to be shown under current liabilities in b/s
charanteja.nsr
(ACMA and BCOM)
(818 Points)
Replied 10 June 2011
| Originally posted by : Arvind | ||
 |
I think Piyush is talking about -ve Cash & Bank balance..., ie there may be Bank Overdraft... How could it be possible to have -ve cash balance :) If you are having -ve Bank balance, then you have to show it as Current Liability, and you can not made such entries to show it as aset. However, you can have cheque received but not deposited.. Refer bank entries after 31st March upto next 4 days... Chq deposit between this period having date of reporting FY, can be show as debit in accounts and accordingly, you can manage you Bank Bal... |
 |
agreed and some explanation as follows
A negative cash balance appears on the balance sheet when the cash account in the general ledger has a credit balance. The credit or negative balance in the general ledger cash account is usually caused by a company or organization writing checks for more than the amount in the general ledger cash account.
When preparing the balance sheet, the negative balance in the cash account should appear as a current liability (Checks Written in Excess of Cash Balance) instead of reporting the negative cash as an current asset.
A negative cash balance in the general ledger (on the balance sheet) does not mean that the company’s bank account is overdrawn. For example, if a company writes checks for rs100,000 and mails them at the end of the day to suppliers in another state, those checks might not clear the bank account for four days. The general ledger account might show a negative rs40,000 but the bank’s checking account might be reporting a positive balance of rs60,000. If the company deposits more than rs40,000 tomorrow morning, the bank balance will not show an overdraft because the bank balance will be large enough to pay the rs100,000 of checks when they clear the company’s checking account in a few days.
M. N. JHA
(CA)
(8316 Points)
Replied 11 June 2011
Book a loan before the date of negative cash balance any repay when sufficent cash available in book. . . . . . . Lolz
Ruchit Berlia
(Student)
(41 Points)
Replied 11 June 2011
hay piyush thats really a bad accounting practice if you have a negative cash bal. but in practical life it does happen i found it in many companies during audit. u can show a cash transfer from another unit ( if any) of that company having surplus cash on that date. But try to avoid this situation in future. its not a proper accounting.
kaushal
(C.A. Student & Audit Assistant )
(44 Points)
Replied 11 June 2011
Hey Dear
My suggestion is to first of all to re check you recorded entries and accounts. After that if the result is the same then book a loan before the date where your cash balance is become negative. The loan should be an unsecured loan.
M. N. JHA
(CA)
(8316 Points)
Replied 11 June 2011
Another way to make it correct- reduce exp of 5 lacs before negative balance and book that exp when sufficient cash available in book. . . . .
Aravind..
(CA)
(1262 Points)
Replied 12 June 2011
Double booking of expense or any other cause it may be. But More than accounting practice, i think it has something to do with the propriety and expense meeting and income recognition. Bank withdrawals for cash expenses and cash income recognitions have to be checked.
Aravind..
(CA)
(1262 Points)
Replied 12 June 2011
To mean it simply, i can say that not all cash incomes of the concern are accounted purposefully. But the concern wants to claim all its expenses out of the firms cash. This is really not good.
Aravind..
(CA)
(1262 Points)
Replied 12 June 2011
Mr.Jha's answer ll be correct in your case. Dont think much about accounting aspects, as the mistake which we are dealing with might be not because of accounting error.
Any other views.
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