Cash short is recorded as a debit in the Cash Short and Over account, because a shortage is treated as an expense on the income statement.

What cash short and over means

  • The Cash Short and Over account is used when actual cash on hand does not match what the records or register say should be there.
  • It can have either a debit balance (more shortages, like an expense) or a credit balance (more overages, like other revenue).

How cash short is recorded

When there is a cash shortage (actual cash less than what the records show):

  • Debit Cash for the amount actually received or on hand.
  • Debit Cash Short and Over for the shortage amount (this records an extra expense).
  • Credit Sales (or the related revenue account) for the amount that should have been received.

Example:

  • Register tape (or records) show cash sales of 400.
  • Actual cash counted is 398 (short by 2).
  • Entry:
    • Debit Cash 398
    • Debit Cash Short and Over 2
    • Credit Sales 400

Where it appears in the statements

  • A debit balance in Cash Short and Over is reported as a miscellaneous or other expense on the income statement.
  • A credit balance (more cash over than short) is reported as other revenue or a contra-expense item.

Quick view in HTML table

Situation Effect on Cash Short and Over Type on Income Statement
Cash short (actual < recorded) Debit Cash Short and Over Recorded as expense
Cash over (actual > recorded) Credit Cash Short and Over Recorded as other revenue / contra expense

In practice, this account is most common in retail and petty cash situations, where small counting errors and handling differences occur frequently in day-to-day cash operations.

TL;DR: For a cash shortage, debit Cash Short and Over (expense); for a cash overage, credit Cash Short and Over (other revenue).

Information gathered from public forums or data available on the internet and portrayed here.