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using undeposited cash for owner drawings

Peter_6481025

I have the owner taking cash from undeposited funds that I need to account for.

I am assuming that I would deposit the cash to petty cash (or similar account) - but I need to post the payment to the owner as "owner drawing"

How do I best perform this task to ensure I can properly account for the cash I have taken, and correctly show that money has been paid to the owner, as a owners drawing?

Comments

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narelle harvey_7311100

KEEP A LIST OF DEBITS AND CREDITS AND YOU SHOULD BE FINE.

Charley

Tell him not to do it

Peter_6481025

So I understand you correctly, this is performed in:

BANKING > TRANSFER FUNDS

Transfer funds from: [Petty Cash]{Bank}
Transfer funds to : [Owners Drawings] {Equity}

Alternatively, the other way you have described would be to:
BANKING > WRITE CHEQUE

Pay to [Owner]
From Account [Petty Cash]

Am I on the right track here?

Peter_6481025

Unfortunately, that does not work. He does what he wants and I just have to fix up the books so everything balances.

Peter_6481025

Appreciate the comment, but I was looking for the procedure to record it all so I balance.

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Charley

Hi Kevin Peter, I think it's part of our job as bookkeepers to find systems that work for our clients so that it doesn't cost them so much. I've had a few clients like this but when you explain to them why you need to keep monies in and monies out separate most will see it and listen. Those that don't want to listen I have a separate rate (double) for sorting out the crap, when they see how much extra it can cost then they listen. I've got one client that refused to listen and I didn't know what monies related to what whether it was bill payments, drawings or whatever. In the end I talked to his wife and he's been very meek and listening ever since. His accountants bill was down heaps as well and I think that's why I got the bottle of Jamesons for Xmas.

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[Deleted User]

When you receipt the payments from customers you put to undeposited funds. When you do the banking - select the receipts you are going to bank and then on the next line put a minus to owners drawings and put an explanation that cash taken by owner , or something similar. this will give you the correct amount for banking , the right amount receipted to the customer and the correct amount to owners drawings. I worked for my father for a long time and this always worked. good luck.

Suzanne Lockwood

Hi Peter,

In addition to Kathy's suggestion I get some of my clients to use the 'Cash back goes to' option at the foot of the Make Deposits screen. Select the Drawings Account (or Directors/Beneficiaries Loan Account etc depending on the entity type). Enter a relevant memo and the amount used for private use in the Cash Back Amount field which will be treated as a negative amount. You would use this method if you wanted to see a subtotal of the moneys that would have been banked, before the adjusted total that was banked. Either way works well. If you have to account for additional funds banked that derive from the business owner use Kathy's method with the additional line with a positive amount to ie Capital Contributed account or offset it against Drawings for small/random amounts. Hope that helps.

Regards, Suzanne

Peter_6481025

Hi Suzanne,

Thank you for your comment. The method you have outlined is most likely the easiest method, even when the owner takes specified amounts of cash.

In regards to Kathy's suggestion, I sort of understand what she is referring too, please permit me to outline the method and correct me if I am wrong:

To assign an amount of cash taken, I would:
1. choose the owners name from received from field?
2. Select undeposited funds from the "from account"
3. Choose CASH as the payment method
4. add the amount of cash taken as a minus figure?
5. Add a comment in the comment field as to where/why cash taken

Regards, Peter

Sally McIntosh, Accredited Consultant

Hi Peter,

Also, if you are using the Make Deposits/Record Deposits window to receive cash into your Petty Cash bank account, at the bottom of the screen is an option for cash back where you can select the drawings account and the amount.

But I am a huge fan of transfer funds - very quick and easy!

Kind regards,

Sally McIntosh (sally@samsolutions.com.au)

Acctd4

I agree with Kevin, Charles, Suzanne & Sally. However, personally I never use the "Transfer Funds" feature because:

It doesn't allow the use of a Name
It doesn't allow the use of a transaction number (some people like to use the specific bank's EFT transaction number, which "Transfer Funds" doesn't allow for) &
It doesn't provide enough detail in reports (mainly due to 1. & 2.)!

Instead, I always use the "Write Cheque" or "Make Deposit" options to enter transactions.

The biggest tip I give my clients regarding bookkeeping is:

You need to re-create what has actually occurred .....

Put simply:

If you receive money, use "Receive Payment", if you've purchased something that you have a tax invoice for, "Enter Bill" & when you pay it, "Pay Bill". If you purchase something you just receive a till receipt for, "Write Cheque" etc

When it comes to "Petty Cash", sometimes this is an actual cash tin so I always recommend entering each receipt (via "Write Cheque") using "Petty Cash" as the bank account.

Some suggest entering all the Petty Cash transactions on one "Write Cheque", but personally I find that a very inefficient way of tracking & finding transactions down the track!

If the owner is specifically taking the monies from cash actually BEING deposited, I would use the "Cash back goes to" on the "Make Deposits" window, to correctly deposit the cash less the owners amount.

For owner's draws/personal spending from either the bank account or existing cash held, I would enter a "Write Cheque" (to the Owner) & post it to either "Shareholders Loan" (other current asset-type account, if a Pty Ltd Co) or "Drawings" (Equity-type account, if a sole trader/trust/partnership)

Graham Boast

Hi Peter. In step 2, the from account should be either drawings or beneficiary/loan account - use drawings (an equity account) if you are not sure. Graham

Peter_6481025

HI Graham. Many thanks for further clarifying the procedure. The assistance here has been phenomenal!

Peter_6481025

Shaz, you are a gem! Really appreciate the thorough explanation outlining the pro's & cons on this matter and the detailed procedure.

From what I have read on this thread, I have not only learnt how to allocate cash taken by the owner, but I have learnt that even if he takes some cash, other cash I can post to other accounts to draw from later. Furthermore, I have learnt more than one way to do exactly that.

I can't thank everyone enough for their contribution on this thread as it has helped me immensely - as it will others!

Charley

He's not lazy, his hourly rate is huge. It's just that he is one of those that expects everybody to fix his mess up behind him.

Kevin V. Russell

Pete I think the problem people have is they buy Reckon software in the expectation they either don't need to understand accounting principles or that it will teach them how to do all this. That isn't what any accounting software will do. It's not meant to. There's plenty of books around. The Quickbooks for dummies series are very good.