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Negative Balance in Petty Cash Account

Shaikh Mohammed Wajid Ali (Manager Finance & Admin) (54 Points)

25 April 2010

I would like to thank you in advance for replying to my below mentioned query:

Our company hands over some cash to an employee for meeting day to day petty expenses. Some times the petty cashier puts in cash from his own pocket and spends for the company. When the vouchers are posted, the petty cash account shows a negative balance.

My question is can we have a negative petty cash balance in Petty cash account or Main Cash Account ?

If yes, under what circumstances andhow would it be reported in the balance sheet?

If not, what should be the entries to rectify it?

Please advice

Wajid Shaikh

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18 Replies

(Guest)

there can never be a negative cash account...I think cash put in by accountant can be treat it as a type of loan..however Im giving my opinion...not so sure.

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(Guest)

Sundry creditor account should be created in Cashier name.

After claiming the amount from Company, entry may be reversed......

There should not be any negative cash balance on any day. rather, amount may be by cashier-sundry crediot account.

Such event should be unusual. otherwise, company should provide adequate cash..

Siva

sudhir rawal (B.COM/PCC/ARTICLE/'O'LEVEL) (314 Points)
Replied 25 April 2010

sir you can

open a employee petty cash a/c in your books and whenever your petty cash goes negative

then debit him with that negative amount which shows and creditor of that amount and

when you formally paid amount on next day first credit the employee petty cash a/c in which you will have and idea that at what amount employee has spent in our firm and

finally paid excess on that day your cash balance will never be negative

(Guest)

vikash rathi (Chartered Accountant) (787 Points)
Replied 25 April 2010

ther can never be negative balance in cahsh book either in petty or in main.........rectify it by passing entry ........cash...dr to accountant (as s.creditor)and s.creditor dr to cash ( when cash is remmited.....)

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Ritesh Jain (CA, CS in Job) (675 Points)
Replied 26 April 2010

Cash account will always have dedit balace, there cannot be any negative balace.

The situation which you are posting is of Imprest account sort of thing i.e an epmloyee has been given Rs 5000/- or so for petty expenses and he will recoup that amount when he exhaust the same.

In case whwn he spend more than the imprest amount lets say Rs 5500/- then only enter the voucher of Rs. 5000/- and then make a recoupment entry after that pass the next Rs 500/- entry .This will not show any negative balance.

Thanx.

Shaikh Mohammed Wajid Ali (Manager Finance & Admin) (54 Points)
Replied 26 April 2010

Rohit, Silent Gang, Sudhir, Vikash & Ritesh, thanks a million for taking out your valuable time to reply my query.

Keep up the good work.

CA Sanjay Jha (ACCOUNTS MANAGER) (914 Points)
Replied 26 April 2010

Cash Acoount always positive not in negative

this type of accounting is wrong.

So if possible then u first lend\advance to company then book the cash exp entry.

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 26 April 2010

Hey friends ,

Assuming such a situation remains in the books of account, will the same be disallowed by the Income tax authorities for the reason that such expenses relating to negative expenses was not met by the firm's/company's cash

$wap$ (Assistant Auditor) (189 Points)
Replied 26 April 2010

Petty cash can never be negative and has to show debit balance only.. expenses incurred over and above that can be provided in the books of account without taking the cognisance of whether the cashier has put in any amounts or not..

P.S. The fact that the cashier puts in his own cash is a big alarm.. how can it not be possible that he is not withdrawing any cash for personal use.

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Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 26 April 2010

Just debit cash and credit petty cashierbeing cash received from Mr. X (say he is petty cashier)

pass following

Cash A/c __________________________ Dr. XXXX

To Mr. X________________________________XXXX

in it is the balance sheet date then Mr. X will be shown as under loans and advances, Advances head

Gaurav Sharma (Credit Risk) (23 Points)
Replied 26 April 2010

Dear Hareesh,

The creditors's position shown to cover negative cash will not effect the deduction of expenses as otherwise also the expenses and paid in cash or credit is availed for it from bankers, creditors, service providers.

However for a individual to show the investments deductible under Sec 80-C not out of income but by loans may create a issue.

Originally posted by : Hareesh H Sharma
	Hey friends , Assuming such a situation remains in the books of account, will the same be disallowed by the Income tax authorities for the reason that such expenses relating to negative expenses was not met by the firm's/company's cash

Gaurav Sharma (Credit Risk) (23 Points)
Replied 26 April 2010

Dear Hareesh, The creditors's position shown to cover negative cash will not effect the deduction of expenses as otherwise also the expenses and paid in cash or credit is availed for it from bankers, creditors, service providers etc. However for a individual to show the investments deductible under Sec 80-C not out of income but by loans may create a issue.