Cash Lost by Theft Journal Entry

Most businesses deal in cash on a daily basis – it is the lifeblood of the organization. In accounting terms, cash is classified as a current asset on the balance sheet. This simply means that it is an easily liquidated asset that can be used to pay current liabilities. Given its liquidity, cash is often seen as the most important asset for a business.

However, it is also important to remember that cash can quickly disappear if it is not managed carefully. Therefore, businesses need to have systems and procedures in place to ensure that cash is properly accounted for and safeguarded. By doing so, they can ensure that they have the funds they need to meet their short-term obligations and continue operating smoothly.

While cash may seem like the simplest and most convenient form of payment, it actually comes with a number of risks. Perhaps the most obvious risk is that cash can be easily stolen. If you lose your wallet or have it stolen, you may be out of a significant amount of money. Even if you’re careful with your belongings, there’s always the possibility that your home could be broken into and your cash taken.

In addition to the risk of theft, cash is also difficult to replace if it is lost or damaged. If your house burns down or you suffer some other type of disaster, chances are your cash will be gone for good. Finally, cash is also one of the easiest ways for criminals to launder money. For all these reasons, it’s important to consider the risks associated with keeping cash on hand before making any decisions about payments.

Journal Entry for Cash Lost by Thief

The company record the cash balance on the financial statement. But when the cash was stolen, we need to remove it from the balance sheet. It needs to record as an expense on the income statement.

The journal entry is debiting Cash Lost by Thief and credit cash.

The entry will increase the expense on the income statement. The cash balance will be reduced as it was stolen already.

Example

Company ABC is the supplier which sell clothes to local customers. One day the thief has broken into the office and steal cash on hand amount $ 5,000. Please prepare journal entry for cash stolen.

The cash was stolen from the company, so we must get ride of it and record the expense.

The journal entry is debiting cash lost by thief $ 5,000 and credit cash on hand $ 5,000.