cash purchases and accounting records - The Book-keepers Forum (UK)

zetor1111 · Member

cash purchases and accounting records

nadeem786 · Member

hi there

I think your transactions could be like this way,

Purchases a/c Debit
to Cash a/c Credit
or to Your personal bank a/c credit
or soure of your payment is credit

what do you think

Regards

Nadeem

Rickster · Member

Hello Nadeem

I am curious regarding your response.

From what the situation is it was my understanding that there was no 'cash' in the business and 'cash' purchases were made from his personal account.

Am I wrong in saying that would this no be Dr Purchases and Cr Capital introduced ?

As this would effectively be money owed back to the owner for buying the items for the business?

I only ask as because if he credited cash with the amount, would this potentially make his cash balance overdrawn which doesnt make sense to me if he had no cash (current asset) to begin with in the business.

Cheers

Count1314 · Senior Member

If you took money out of your personal account and kept in a 'petty cash' tin, you would Credit capital account and Debit the cash account with this specific amount if all of this money was earmarked for the business. Therafter, all purchases would be credited against the cash account and debited to the relevant purchases/expense accounts.
However, as the second response suggests, if you paid out of your personal account as and when required, you could journal these amounts staright from capital to expenses/purchase accounts or take the same steps above with each specific amount (since it can be quite difficult to make certain payments from bank accounts in some packages - e.g., it may not be possible to pay a creditor from any other account han a bank account).

Alison · Senior Member

HI

I have clients who often use their own cash to buy items/services for the business.

I find best way to record this is to have (if a Limited Company a bank nominal code for Director's Loan account so as they pay suppliers you allocate using Director's Loan account to pay this, this then shows the amount owing to the Director. When the Director can pay themselves back as their is money in business account this is simply done in the transfer part of sage transferring from bank 1200 to DL Loan nominal.

This is the same if sole trader but I call this Owners Cash Account or something along those lines, but acts in same way.

For both if not a supplier payment enter as cash payment on DL AC or Owners Cash Account then transfer in same way when available in business account.

Alison