cash sale

pay expenses from cash sale

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Hello everyone,

The cafe I am working for uses the cash from the till to pay for groceries, recording these expenses as the cost of goods sold. When I record the payment, I mark it as paid from the cash sales account, assuming the money taken from the till is from cash sales. However, this increases the credit side of the cash sales account. Is there any alternative treatment I can use to mark the expenses as paid, rather than using the cash sales account, or is what I am doing correct?

Thank you for your answer in advance

Replies (18)

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By Paul Crowley
28th May 2024 02:38

How are the sales recorded? There must be a till system operated.
What was the system before you started work there?
What bookkeeping system is in place?

There can be no useful answer without knowing if the sales are being recorded correctly

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Replying to Paul Crowley:
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By Fatima Sab
28th May 2024 14:44

Hello Paul,
Thank you for your response. I started to handle the bookkeeping by myself as the accountant left 3 months ago and there was no job handover. The cafe has a till operating system and the owner brings weekly the total cash sales and expenditure from the till withdrawal. They bank the cash from the till. I use Xero.
regards
Fatima

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Replying to Fatima Sab:
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By FactChecker
28th May 2024 15:12

"I started to handle the bookkeeping by myself as the accountant left 3 months ago and there was no job handover. The cafe has a till operating system and the owner brings weekly the total cash sales and expenditure from the till withdrawal. They bank the cash from the till. I use Xero."

It sounds like you are only responsible for bookkeeping (but not the accounts) - so does that mean you are the only person responsible for the 'books' in Xero?
If so, have you had any training (in bookkeeping in general or in the specifics of Xero)? And are you happy that all the non-cash transactions (purchases and sales) are being recorded properly (i.e. your concern relates solely to what's going in and out of the till)?

It's not a particularly good analogy but you can think of the till as like a giant Petty Cash box ... for which you need to know the discrete additions & subtractions.

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Replying to FactChecker:
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By Fatima Sab
28th May 2024 17:10

Hello,
Thank you for your reply. I am a bookkeeper and I don't have a problem with recording the transaction, however, I have not dealt with cash before in that particular case.

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By Sandnickel
28th May 2024 06:18

It's correct to be a credit. The cash sales will be a debit and the expenses will be a credit.

You will need to ensure that the gross sales are recorded and the expenses are correctly accounted for. Your balance should then match the amount of cash in the till.

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Replying to Sandnickel:
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By FactChecker
28th May 2024 12:23

"You will need to ensure that the gross sales are recorded and the expenses are correctly accounted for" ... this is the key bit.

In the absence of knowing OP's role or what systems are in place, it's impossible to give precise instructions to OP ... BUT it is *essential* that full records are kept of gross sales (and separate records of expenditure).
The net cash (balance in till) is not a replacement for maintaining proper records.

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Replying to Sandnickel:
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By Fatima Sab
28th May 2024 14:46

Thank you.

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By johngroganjga
28th May 2024 08:15

The entry you need to make to record cash payments is a credit to the cash account, not the cash sales account.

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Replying to johngroganjga:
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By Fatima Sab
28th May 2024 14:48

Hello John,
Thank you for your reply. I believe this is what I have to do .
Fatima

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Replying to Fatima Sab:
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By Fatima Sab
29th May 2024 15:17

Thank you John.

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Replying to johngroganjga:
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By Paul Crowley
28th May 2024 16:02

That would be my opinion if the till is connected to Xero
@OP Someone with double entry knowledge needs to figure out whether the Trial Balance makes sense.
You have two different answers at this time.

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Replying to johngroganjga:
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By Fatima Sab
28th May 2024 17:20

Hello John,
If I started to pay the expenses from the cash account, what is your advice to avoid the cash account being in minus ?
Thanks for your advice in advance.

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Replying to Fatima Sab:
By johngroganjga
29th May 2024 10:27

It is a logical impossibility for a cash account to be overdrawn. All you can do is spend the cash that is there. When it's all gone, you can't spend any more.

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RLI
By lionofludesch
28th May 2024 14:04

There's not enough clarity in your question.

What does the business's accountant say?

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Replying to lionofludesch:
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By Fatima Sab
28th May 2024 14:50

Hello Liono,
Thank you for your reply. Unfortunately, there is no communication available with the accountant.
Fatima

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Replying to Fatima Sab:
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By Paul Crowley
28th May 2024 16:04

Sounds like you do not have an accountant.
The question was not about the prior employee, it was asking about the external accountant.

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Replying to Paul Crowley:
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By Fatima Sab
28th May 2024 17:24

We are looking for a new accountant as we believe the transaction was not recorded correctly.

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RLI
By lionofludesch
28th May 2024 15:19

Open a bank account called "Cash".

Post the gross sales as a debit to this account. All the payments as credits.

The balance on this account should equal the amount banked. Transfer this to his bank account.

Or, if he banks random amounts, the balance should represent the notes and coins in his till.

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