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Negative cash - how to deal

CMA RAVI (ASSISTANT MANGER - FINANCE) (478 Points)

25 December 2012

Hi one of my branches have negative cash at month closing very often in branch petty cash ledger. So before audit I want to adjust and make it positive. So can you advise how to proceed in right direction. We generally send cheque to branch and receive vouchers.

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15 Replies

V Vara Prasad (Chartered Accountant) (212 Points)
Replied 25 December 2012

adjust the cash payments and receipts dates

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Karan Teli (Life Is just an Illusion...!!) (4573 Points)
Replied 25 December 2012

Originally posted by : V Vara Prasad
	adjust the cash payments and receipts dates

This is one the solution to present problem. In future you can do one thing that give them some cash in advance and show it as a blocked cash. You can also implement imprest system to avoid the same in future.

CA Sanjay Bag (CHARTERED ACCOUNTANT) (3340 Points)
Replied 25 December 2012

Yes, you can adopt imprest system to encounter this problem,

@VaibhavJ (Believe!! Live your dreams!) (33516 Points)
Replied 25 December 2012

If your branch doest had cash how they did spent?

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CMA RAVI (ASSISTANT MANGER - FINANCE) (478 Points)
Replied 25 December 2012

@ vaibhav branch manager adds cash from his pocket till cheque arrives but vouchers are effected by him before they receive petty cash chq that's what is leading to negative cash in branch at month closing

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Vince , in persuit of CA (Finding CA ) (380 Points)
Replied 25 December 2012

I agree Mr. v vara prasad.

Ashwani Narnoli (.) (1843 Points)
Replied 25 December 2012

agree with above

Nishant Varshney (Industrial Trainee) (199 Points)
Replied 25 December 2012

You can ask here also

https://cafunclub.webs.com/apps/blog/

praveen (Chartered Accountant) (6971 Points)
Replied 25 December 2012

See if the branch manager adds cash for meeting the expenses of the company then you can show it in the same way. Just create "Manager A/c" in sundry creditor and start making expenses from his account. Whenever he takes in cash for the money he has spent it can be adjusted suitably.

This will help in accounting the transactions properly and also checks that no extra payment is made to the manager.

SIVASANKAR (Practising Chartered Accountant) (30 Points)
Replied 26 December 2012

Originally posted by : praveen
	See if the branch manager adds cash for meeting the expenses of the company then you can show it in the same way. Just create "Manager A/c" in sundry creditor and start making expenses from his account. Whenever he takes in cash for the money he has spent it can be adjusted suitably. This will help in accounting the transactions properly and also checks that no extra payment is made to the manager.

Very good solution. More practical.

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mahendra jangid (Dy. General Manager (Finance)) (444 Points)
Replied 26 December 2012

As per the basic concept, you can not spent unless you have cash in hand and hence negative cash balance is absurd situation. It is therefore suggested that as an when an expenditure is to be incurred by the Manager, he should prepare 2 vouchers, one for cash received from the Manager (this amount may be credited to his Account or any other account meant for this purpose) and second for expense incurred. On receipt of cash after realisation of cheque, amount infused by Manager can be withdrawn and paid back to him and entry can be passed accordingly by crediting cash book and Dr Manager's A/C.

mahendra jangid (Dy. General Manager (Finance)) (444 Points)
Replied 26 December 2012

ramaswamy s tarikere (Partner) (28 Points)
Replied 26 December 2012

Managing a business with negative cash balance does not exhibit true accounts. It is best that this area is given due importance by management and avoid the negative balance by prudent cash management policies. If Branch Manager is providing cash from his personal cash, it is something fishy and should never be encouraged.

We as a responsible professionals, need to advise and ensure that cash managment improves. Though unentical methods are sometimes practiced, it needs to be discouraged and we must ensure sufficient cash on hand to meet operations at all times. Ramaswamy S Tarikere

ca.tsr301 @ gmail.com

CA Sourabh Goenka (Chartered Accountant) (249 Points)
Replied 27 December 2012

I think cash given by manager is not as per norms of the company, this is a adjustment made at branch level for meeting the expenses and usually done at various places.

Practically, you will have to see that how much amount for negative cash arises and for how many period??

If it negative cash is only in limit of petty cash and adjusted in 2-3 days, then you should adjust the dates of expenses which can be easily done.