Over And Short
"Over and Short" refers to the discrepancies between the actual recorded amounts and the expected or should-be recorded amounts in accounting or financial management. These discrepancies can arise from various causes, including recording errors, calculation mistakes, theft or fraud, inventory management issues, or other operational errors. Over and short discrepancies can occur in areas such as cash management, inventory management, and bank reconciliation. When such discrepancies are identified, businesses typically need to investigate the causes and take appropriate corrective actions to ensure the accuracy and completeness of financial records. Frequent occurrences of over and short discrepancies may indicate flaws in the internal control system of the business, necessitating audits and improvements.
Definition:
“Profit and loss variance” refers to the difference between the actual recorded amount and the expected or should-be recorded amount in accounting or financial management. This variance can be caused by various reasons, including recording errors, calculation mistakes, theft or fraud, inventory management issues, or other operational errors.
Origin:
The concept of profit and loss variance originates from the basic principles of accounting and financial management, aiming to ensure the accuracy and completeness of financial records. As businesses grow in size and complexity, managing profit and loss variances becomes increasingly important.
Categories and Characteristics:
1. Cash Management Variance: Mainly involves the recording and management of cash flows, common in retail and service industries. It is characterized by being easy to detect but difficult to trace the specific cause.
2. Inventory Management Variance: Involves the difference between recorded and actual quantities of inventory items, common in manufacturing and retail industries. It is characterized by multiple possible causes, such as theft, damage, or recording errors.
3. Bank Reconciliation Variance: Involves the difference between bank account records and internal company records, common in all types of businesses. It requires regular reconciliation to identify and correct variances.
Case Studies:
1. Case One: A retail store discovers at the end of the month that the actual cash is 500 yuan less than the recorded amount. After investigation, it was found that the cashier had over-refunded cash during a refund process.
2. Case Two: A manufacturing company finds during a quarterly inventory count that the records show 100 items, but there are only 90 items in reality. After investigation, it was found that the discrepancy was due to an input error in the warehouse management system.
Common Questions:
1. How to detect profit and loss variances? Regular financial audits, inventory counts, and bank reconciliations can help detect profit and loss variances.
2. What should be done after discovering a profit and loss variance? An immediate investigation should be conducted to determine the cause, and appropriate corrective measures should be taken, such as adjusting records and strengthening internal controls.
