Hi, I have only just started up book keeping from home so you will have to forgive me for my stupid question.
My client receives cash/cheque payment for her services , she will sometimes use the cash for business expenditure. The only thing is when she deposits the cash/cheques at the end of the week I only see it on the bank statement as a lump sum, this is after she has spent some of her takings on business expense. How will I ever get my bank to balance unless I know how much money was taken before any cash was spent. I don't want to ignore the expenses because they will benefit her as an allowable expense for tax purposes. I did think about just setting up an un-reconcilable petty cash account so that I am still able to balance the current account and then these expenses will still appear on the P&L. Does this sound ok or could someone think of a better way to deal with this?
As far as I an see from the paperwork she has given me, she pays all of her takings from the week i.e. cheques and cash and pays it all into her account. Through the week before she deposits it to the bank she spends some of it on consumables. I must admit it's not alot but I am never going to get the cash account to balance.
I don't think she writes receipts or keeps a SDB...... maybe I will need to ask her about it.
Ok before you get back to her. Can you discover her turnover -- maybe bankings plus cash outgoings? That would be a classic formula. Look up 'incomplete records' in your text books or on internet.
This could be a very normal situation. Client doesn't know you need GROSS turnover. Not necessarily hiding it. You know better as in 7 + ? = 8. The 7 being the amount banked and the ? being the amount spent beforehand.
The 8 could be 8000 or 8 million, with no copy sales figures, you try to derive it from the information you've got. How does that sound.
Tim that sounds fantastic why didn't I think of that!
I finished my AAT a couple of years ago and have been working for a company up until now so lots of the valuable information I learnt has gone to the back of my head. I don't think bearing two children has helped either.
Moving forward you could suggest to your client to keep a record of all sales and purchases done either per week (if its only a few sale/expenses)or per day, then this way it will be easy to track it in future. Hope this helps.
The fun part is when you have artificially added say, £8000 sales. There's now five quid cash in hand. However, there is no fuel bought anywhere, yet you know she does 30,000 miles a year. What do you do then ?
