Re: Minimise process of small business cash receipts?

usenet@xxxxxxxxxx wrote:

> Ronald Raygun <no.spam@xxxxxxxxxxxxxxxxxxxxx> wrote:
>> >> This is of course wrong. When you buy something you should *credit*
>> >> cash, while debiting a purchases or expense account, and when someone
>> >> pays cash to the business you should *debit* cash, while crediting
>> >> sales.
>> >>
>> > I knew I'd get it the wrong way round! :-)
>> >
>> > As it's a home written accounts package it's not double entry as I'm
>> > unlikely to defraud myself.
>>
>> Are you using the words "as" in the sense of "because"? If so, I
>> don't understand:
>
> Just delete the first "As",

Then it won't parse. :-)

> the second "as" is because (as I
> understand it) *one* of the reasons for double-entry book keeping is
> to help check on fraud.

That's news to me.

>> (1) Why is the fact you're not trying to defraud yourself a reason
>> not to use double entry? Double entry does not purport to combat
>> fraud, the purpose of its mirror entries is to help prevent mistakes
>
> So an intentional mistake by an employee isn't fraud?

If it's intentional it's not a mistake. Besides, if you want to commit
fraud, it's not really more difficult to do so with double than with
single entry.

>> When sales and purchases are
>> always settled immediately, and only ever by one method (cash only or
>> bank account only), and where your business does not need to keep track
>> of monies it owes to suppliers or is owed by customers, then there is
>> little point in using double entry because each income entry (a credit)
>> would always be mirrored by Dr Cash or Dr Bank, and likewise every
>> expenditure entry (a debit) would be mirrored by Cr Cash/Bank.
>
> Yes, OK, that's where my business is basically. Purchases are always
> settled immediately (mostly by credit card)

If by credit card, it's hardly immediate, unless you treat the card
account as your "bank" account.

>> > I think it's that the money is needed in the personal account to make
>> > the purchases of material etc.
>>
>> That's not what you said earlier, because you said you would pay the cash
>> into the personal account and then immediately write a perosnal cheque
>> for the same amount to the business.
>>
> That's not what I intended to say (or at least not my intended
> meaning). If the company receives cash it's entered as a credit to
> Petty Cash. If I buy something for the campany with cash out of my
> pocket that's entered as a debit to Petty Cash. In general this means
> that the Petty Cash account ends up with a large debit as we receive
> little cash but do spend a fair amount. So, occasionally, the company
> writes us a cheque which gets entered as a credit to Petty Cash. If
> it was the other way about (I think it's happened once) I write a
> cheque to the company. However this is only done occasionally, the
> Petty Cash is allowed to go quite a way up or down before settling it.
> (I know these 'credits' and 'debits' are the wrong way around to your
> view but I view Petty Cash as a tin box with money in it and my use of
> credit and debit is the right way around for this view of Petty Cash)

Traditionally petty cash is treated as if it were a separate bank account.
Real transactions are credited or debited to their proper income and
expenditure categories, and if you have double entry technology then
their mirrors are debited or credited either to bank or to petty cash or
to any other types of surrogate bank you might have (such as a credit
card account). Transfers between bank and the cash tin or card company
do not affect the trading accounts and are essentially "hidden" unless
you have double entry. It seems to me that if you do what you say you
do, namely show transfers from cash tin to business bank account as
single-entry credit entries, this presents a wrong picture, and you lose
the information as to what the money coming in was for. Surely the real
external source of the money should show in the books. Or do you have
a separate set of accounts for the cash tin?

> Quite, but it does make keeping track of things easier if *everything*
> on the credit card statement is the company's. Occasionally I use
> other credit cards for company purchases and, if I do this, I just
> treat it as a Petty Cash item as described above.

Yes, it makes things even easier if *everything* in the business accounts
corresponds to something in the business bank account. So all credit card
purchases would be deferred in the accounts an not show up until you settle
the monthly card bill with a business cheque, and then the entry in your
accounts would be a super-entry consisting of all the card transactions as
sub-entries (or in your case all the card transactions would be entries
sharing the same cheque number). Likewise all cash takings going into
your personal pocket would be settled occasionally with a personal cheque
paid to the business account (and would probably show as lots of entries
sharing the same BGC chit number).

Traditionally, petty cash systems intended for petty purchases involve
the business advancing money into the tin, but without double entry
this is difficult to keep track of, and it's simpler if you can
advance the cash personally and have the business reimburse you by
cheque in due course.

.

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