Is it possible for a negative cash balance to appear on a balance sheet? If so describe the circumstaqnces under which such a phenomenon would occur?
I have identified two cases:
1. in case of bank overdraft
2. when cheques are issued more than the current account balance but not presented.
Plz identify what other circumstances can be.
Dear Osho,
In both the circumstances mentioned by you above, it will not be shown under Cash & Bank as negative balance but will be reclassed under "unsecured loan" under the liability side and shown as "Bank overdraft or book overdraft".
Important & good question.I never heard or seen that cash can be negative in Balance sheet.hearing it for the first time.thanks sharma ji for the clarification.
Ms Chhabra is right , How can anybody spend the amount more than that he has. So no question of negative cash balance. if you arrange cash by taking loan that will come under liability.
| Originally posted by : CA RITIKA CHHABRA | ||
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negative cash is practically not possible. unless any mistake is done by accountant in entry posting. and Osho the cases which you have referred are for negative bank balance and this can happen. in that case it will be shown on liability side. |
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Yes there cannot be negative Cash as can any one say he has minus 10 with him its ridiculous. Whereas even in case of bank we dont say its negative but use the term "Overdraft". Agreed with sharmaji
| Originally posted by : CA RITIKA CHHABRA | ||
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negative cash is practically not possible. unless any mistake is done by accountant in entry posting. and Osho the cases which you have referred are for negative bank balance and this can happen. in that case it will be shown on liability side. |
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| Originally posted by : CA RITIKA CHHABRA | ||
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negative cash is practically not possible. unless any mistake is done by accountant in entry posting. and Osho the cases which you have referred are for negative bank balance and this can happen. in that case it will be shown on liability side. |
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Agree - because if you have only Rs. 2/- cash in hand/ pocket you can't pay Rs.3/- to anyone.
thank you every1
dear osho
The simple logic that we will never get a negetive cash balance as suppose if u have Rs 100 in ur money bag, u can only spend upto Rs 100,but not more than dat.its absolutely impossible to spend another Rupee from that.So negetive cash is impossible.
And in balance sheet the order as per company act, cash in hand will be shown as Cash in hand only.dont mess up it with the bank balance as it will be shown under Cash at bank.and if there bank O/d exist, then as per balance sheet representation we show it on liability side under current liabilty head.we cannot show a negetive bank balance under asset side.
And in case of cheques, i can say dat is a matter of bank reconcilliation statement and it does not makes a bank balance show negetive balance in balance sheet.
Remember : ur asset cannot be negetive.
| Originally posted by : A trash on earth(kaustav) | ||
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How To deal in case if cash balance becomes negative, the reasons being:-
-payments to creditors has been made through cash.
Other details:
sales 4302170
suspense a/c (receipts through cheques) 1920000
bank 2081
cash (-)777000
total expenses 1954000
profit 1082000
Negative cash balance is not possible as you cannot spend what you don't have. The cases which you are referring to are cases of negative bank balance and not negative cash balance.
In case of bank overdraft, it should be under secured loans in liability side (as Overdrafts are provided against some security, mostly stock of goods).
In case of bank account, when a cheque od amount more than the balance in bank is issued, it should appear under current liabilities. (however in such cases, it is advisable to prepare a Bank reconciliation statement and party reconciliation statement and show the actual balances in the balance sheet)
CAclubindia
