Negative Cash Balance

Introduction

Money is an asset, it can be found on 2 financial statements that are statement of accounts and cash flow statements. All money records will be entered together on the asset report. Negative money offset is implied as the liability recorded in monetary statements instead of being recorded as negative asset account. At the end of an indicated time of fiscal articulation, you may see negative cash equalization. In accounting statements, when the cash account in the ledger shows a credit side balance then such balance is negative.

What is negative cash balance?

The money parity accessible from the cash flow explanation could either be a positive or a negative number. On the off chance that it is positive money adjust then we have to take it to the asset side. In actuality, there is no negative cash balance. A negative balance denotes to the money supplied to the business by way of a bank OD (overdraft) or by the supporter himself. Hence the negative cash balance appears on the liability side of the financial report.

Hence the negative balance of cash is shown, on the liability side. The assets get populated when the balance is credit and liabilities get populated when it is negative.

When does a negative cash balance appear on the balance sheet?

A negative balance of cash shows up on the monetary record when the general ledger cash account has a credit balance. While a balance sheet is prepared the negative cash balance will appear as a current liability instead of adding it to the current asset.

A negative balance of cash in the ledger account (on the asset report) does not imply that the organization’s financial balance is overdrawn. For instance, if an organization composes checks for $100,000 and sends them at the end of the day to suppliers in an alternate state, those checks may not be cleared for four days. The general record may indicate a negative of $40,000 however the bank’s financial records may be reporting a positive amount of $60,000.

What is the impact?

A negative in the financial statement does not mean the financial balance of the organization is overdrawn. It may reflect a postponement to perform monetary operations. Case in point, an organization issues a check and conveys the same to the suppliers. These checks may not have been legitimately represented in the ledger. For this situation, in the record it may indicate a negative parity and in the bank financial records it may be a positive figure.

Conclusion

A firm would not like to have negative money. Regardless of the fact that it happens it reflects merely in organization’s balance sheet. It won’t influence organization’s money related operations.