Accounting Terms for Cash

• Cash transactions make up the heart of any businesses' financial health. Businesses need cash to pay their bills and to fund the growth of the company. Customers pay their invoices using cash. Accountants use different terms to refer to cash.

Cash Equivalents

• The balance sheet combines cash and cash equivalents on one line in the current asset section. Cash pertains to cash held on site and cash in the bank. Cash equivalents pertain to items that easily convert to cash. These items include checks received and not deposited and highly liquid investments with maturities of less than three months.

Petty Cash

• Petty cash represents the amount of cash a company keeps on hand for small purchases, like office supplies or postage. The company determines how much money to keep in petty cash and places that amount of cash into a locked box. The office manager assigns petty cash responsibility to one person, often a receptionist. Employees who purchase small items for the company using their own money request reimbursement from the petty cash administrator. The employee provides a detailed receipt to the administrator and the administrator reimburses the employee in cash. When the petty cash balance reaches a predetermined level, the petty cash administrator requests a check from accounting to replenish the fund. The accountant records the expenses in the accounting records from the receipts and gives the petty cash administrator cash to replace the money used from the petty cash lockbox.

Cash Short and Over

• Cash short and over represents the difference between the actual cash in a company's cash register or petty cash lockbox and the amount that should be there. At the end of a cashier's shift, her manager counts the money in her cash drawer. The manager prints a register report detailing the amount of sales and cash receipts for the shift. The manager compares the cash receipts and the beginning cash amount to the register report. Cash short and over represents the difference. A company accountant reconciles the petty cash lockbox when the cash level reaches a minimum level. The accountant summarizes the activity and determines the amount of cash that should be in the lockbox. The accountant compares this amount to the actual cash balance in the drawer. The accountant records this difference as cash short and over. Cash short and over is an expense account and appears on the company's income statement.