Hi all, I do the bookkeeping for a small newsagents business.
He has items such as stamps, envelopes and photocopying that he states is for shop use.
He has put this through the till, as if it's a customer till receipt, yet he writes shop use on the top, to indicate that this is not a customer sale, but items taken from the business for business use.
What journal would I do for this? I have my own thoughts on this, but would appreciate the input of others.
I'll have a go at this using my textbook knowledge. Have never dealt with situation in practice, others can correct me and I'm happy to learn too...
I assume the till receipts in question will not be posted as a credit to sales, in which case I would simply debit the amounts to expenses and credit purchases. Not sure whether I would include VAT entries (where relevant) as there will be no net effect on the VAT return (purchases and expenses being lumped together), maybe would do for the sake of complete audit trail?
If for some reason (automated till???) these items have to be posted to sales, there will be a shortfall in the till which will have to be posted to an overhead account (eg "Cash Register Discrepancies"). These entries would then have to be reveresed via the journal.
You could just credit the sales and VAT account (if VAT is applicable) and debit cash. The shopkeeper can then just put the cash in the till from his own pocket from time to time (he is just another customer that happens to be buying from his own shop).
-- Edited by Quentin Pain on Wednesday 22nd of September 2010 12:32:41 AM
I can see that would be ok for shopkeeper's own use purchases (except there would be no posting to drawings, theory says entries would be to debit drawings and credit purchases).
But Linda says these items are for business use and your solution doesn't post anything to expenses. Is the approach I outlined right or am I missing something?
Because I am still technically a student and haven't started trading for real yet, despite passing exams I'm not totally confident how things work in practice, especially cases like this one. I would like to know for def which way is best to deal with this scenario.
What were your initial thoughts Linda?
Phil
-- Edited by PhilMcTankup on Wednesday 22nd of September 2010 08:12:06 AM
I think it will depend on whether the goods were actually paid for and rung up at retail.
Journal
DR
CR
Sales
Vat Outputs (If Vatable)*
Cash (or Till Adjustments)
Expenses
Purchases (at cost)
*Don't forget there is no VAT on stamps.
This assumes that the till tallies are entered onto the accounts, then the till receipts are posted.
The first reverses the amount posted when the tally roll total is posted The second reverses the the output VAT (If VAT registered) The third adjusts the amount of cash (or the till overs/ unders account). If the owner didn't pay cash then post to the till account. If he did put money in the till (probably not) take the cash out again and give it back to him. The last two lines are internal so no VAT involved, to correctly post to the right nominal accounts
It does depend on various factors but I think that covers it Bill
I may have not read correctly but not sure why so many transactions. I can only see need for last 2 entries. Moving the direct purchase down the overhead. Presumption that he never actually sold anything or paid money in the till Im not seeing a reason to do anything.
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Donna Curling - Complete Book-Keeping Ltd (CBKLtd) - 07939 101900
The reason I did journals to reverse sales is because there unknown variables. I was covering the worst case scenario and took it that the till roll totals have been posted to Sales before the till receipt has been found and entered, and therefore the sales figure would need adjusting.
If it is caught before any entries are made, a simple deduction from the till roll total, with a note written on it, would negate the first two entries.
The till rolls are keyed in, then the little receipts afterwards. Hence the need to adjust the sales figure, as no sale has actually been made. He doesn't put the cash in the till.
Surely, if you didn't adjust it, then your sales figure would be out by the amount of the sale he's keyed in, but not actually paid for?
Why does he key it in the till if he isn't paying for it. Keying it in the till would, presumably be at the sales price which would distort his profit (OK probably not a significant amount but none the less wrong). He should just note what stock he uses for use within the business and transfer from purchases to expenses.
that he states is for shop use ooops! I didn't see that bit (it's like taking exams again :)
I suppose he puts it through the till for stocktaking records Sheila?
How about a simple scenario. Example is stock bought for £10, no real sales, and £2 consumed for the business (no VAT to keep it simple):
1. Dr Stock Bought Cr Bank £10 2. Dr Cash Cr Sales (putting the £2 worth through the till) 3. Dr Sales Cr Cash (cancelling the above) 4. Dr Stock Sold Cr Stock Bought
(obviously transactions 2 and 3 are not entered, just shown here to see the actual logic)
-- Edited by Quentin Pain on Thursday 23rd of September 2010 11:24:16 PM
