When does a negative cash balance appear on the balance sheet?
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 $100,000 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 $40,000 but the bank’s checking account might be reporting a positive balance of $60,000. If the company deposits more than $40,000 tomorrow morning, the bank balance will not show an overdraft because the bank balance will be large enough to pay the $100,000 of checks when they clear the company’s checking account in a few days.
Learn about the Bank Statement Reconciliation.
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suppose if balance sheet does not tally , then which items either on the liability side or asset side can be adusted to make the balance sheet tally .
prin83@yahoo.com
The question is about negative CASH balance and the answer is about negative BANK balance.
There can be a negative bank balance and its very common.
Can there be negative CASH balance?
My boss (a CFO and CPA) does not want to show the negative cash on the Balance Sheet.
My company’s accounting practice is on Accrual Basis. I did the bank reconcilation and the ending balance was negative numbers. It was a combining of some checks and one deposit had not cleared. So my boss told me to reclass the negative cash to Accounts Payable to bring the cash balance to zero.
I am thinking that he is just trying to make the Balance Sheet to look good.
My boss’ explaination is that all the o/s checks is an obligation to pay and that’s why we need to reclass the negative cash to zero. Well his explaination is acceptable, but then I think what we need to do after each bank reconciliation is to reclass all the unclear deposits to accounts receivable and all outstanding checks to accounts payable. But not just because the cash is in negative we then reclass it to current liability.
I am not a CPA and I only have 24 hours in accounting. But I still think my theory is right.
Our co. transfer our cash to fixed deposit for the 15 month this money trnasfer on the 25th march. When we collect the closing bank statment than this fixed deposit amount not show any where in statement, when we ask bank for F.D. statement than they issue me f.d. statment. In this statement bank show 5-6 days f.d. interest.
Than pls. advise me how can i show this interest in ledger as well as balancesheet. Because if we add this interest in the bank statement than bank statement not tally.
Pls. solve my problem and help me.
I recieved Money worth 94400fr with its serial number , on transfer to cash book i debited but did not credit to balance off the accont at the end of period deposited cash of my having a balance 14025 fr at end of the month found i have deposited personal money worth 80375 frw cash. how can i rectify that account to recover my money. thanxs