Why would a cash account have a credit balance?
A cash account would have a negative balance usually if checks were written in excess of cash on hand. However, a cash account having a negative balance is not proper accounting.Cash AccountA cash account is used to account for the inflow and outflow of actual cash that a company has.Why Is It Wrong For A Cash Account To Have A Negative Balance?Since the cash account is used to determine the inflow and outflow of actual cash that a company has, the cash account cannot ever be less than zero. Any monies spent in excess of cash on hand is a type of liability that the company has taken on.Proper Accounting Of A Negative Cash BalanceSince the actual negative cash balance is in fact a type of liability that the company has to pay back, the proper accounting entry should be to a type of current liability account.Suggestion Of Current Liability Account NamesUsually a negative cash balance would be caused by writing a check in excess of the monies that the company has in the bank account. The
