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#5 Cash with a credit balance - When does a negative cash...

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Search our website for more than 1,000 accounting topics: Search our Site Home About 1,330 Testimonials Accounting Topics Test Yourself Q&A Dictionary Careers Download our Materials Q&A Home Categories Suggest a Question 16 Responses to “When does a negative cash balance appear on the balance sheet?” harpreet on July 25th, 2008 11:56 am 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 . 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 . Related Questions Why would a balance sheet list current liabilities as negative amounts? What is window dressing? Is it okay to have negative amounts in the equity section of the balance sheet? Is it possible for owner’s equity to be a negative amount?
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