Cash Stolen Journal Entry
Cash stolen is the event that company’s cash has been lost due to the robbery. It is the loss that the company needs to bear and record in the financial statement.
Cash and cash equivalents are assets that can be quickly converted into cash. This includes items such as cash on hand, checking and savings accounts, money market funds, and short-term investments with maturities of three months or less.
Cash equivalents are important because they provide a company with the liquidity it needs to meet its short-term obligations. Without an adequate cash balance, a company may have difficulty paying its bills or taking advantage of opportunities as they arise. For this reason, companies typically maintain a certain level of cash and cash equivalents on hand at all times. Thanks to the liquidity of these assets, they can be used to cover unexpected expenses or take advantage of business opportunities.
While many businesses choose to keep a large amount of cash on hand, just in case they need it for unexpected expenses. However, this can be a risky strategy. If the business experiences financial difficulties, the cash on hand can quickly disappear. Additionally, if the business is burglarized or experiences another type of loss, the cash may be gone forever. For these reasons, it is often wiser to keep only a small amount of cash on hand and invest the rest in more stable assets, such as short-term investments or commercial real estate. By doing so, businesses can help protect themselves from the risks associated with holding too much cash.
The company is required to reverse the cash account if the actual cash was stolen. It needs to be removed from the balance sheet as the cash is no longer within the company. It has to record as the expense on the income statement. However, it is not part of the operating expense. The company can categorize it under other expenses.
Journal Entry for Cash Stolen
The company is allowed to record the assets which are under its control and it will be able to utilize the assets’ future economic benefit.
If the cash is stolen, it is no longer under company control. It is also not able to use the future economic benefit from the cash.
The company has to remove the cash from balance sheet and recognize the expense on the income statement.
The journal entry is debiting Cash Loss by Thief and credit cash account.
| Account | Debit | Credit |
|---|---|---|
| Loss by Thief | XXXX | |
| Cash | XXXX |
The loss by thief is the expense account record on the income statement. The cash balance has to decrease from the balance sheet.
Example
ABC is a retail store that sells many types of goods to customers. Most of the sales are made in cash, so the company has some cash amount in the drawer. One day, the thief stole cash amount $ 3,000 from the drawer. Please prepare a journal entry for cash stolen.
The company has lost cash amount $ 3,000 which requires to remove from the report and record expenses.
The journal entry is debiting loss by thief $ 3,000 and credit cash $ 3,000.
| Account | Debit | Credit |
|---|---|---|
| Loss by Thief | 3,000 | |
| Cash | 3,000 |