accounts advice ( withdrawals )

thetourist

hi

i am trying to get a basic books system going and have it all together except for the withdrawals .... i have an account for the business and i make 3 types of withdrawals that i can think of

1 ) cash purchases (business related)
2 ) chequebook/withdrawal/credit transfer/etc. (business related)
3 ) chequebook/withdrawal/credit transfer/etc. (non business related - ie profit)

if im right then i need to start a daybook for business (purchases or somthing) and include a section for toping up the petty cash

then i am lost
i suppose i need a petty cash book too ?

what if i want to withdraw money from the business account for personal use (profit) - do i start a seperate book for that or put it in to the purchases book ( this is the main thing i need advice on )

would someone please be able to point me in the right direction
thanks

ircoha

thetourist wrote:

hi

i am trying to get a basic books system going and have it all together except for the withdrawals .... i have an account for the business and i make 3 types of withdrawals that i can think of

1 ) cash purchases (business related)
2 ) chequebook/withdrawal/credit transfer/etc. (business related)
3 ) chequebook/withdrawal/credit transfer/etc. (non business related - ie profit)

if im right then i need to start a daybook for business (purchases or somthing) and include a section for toping up the petty cash

then i am lost
i suppose i need a petty cash book too ?

what if i want to withdraw money from the business account for personal use (profit) - do i start a seperate book for that or put it in to the purchases book ( this is the main thing i need advice on )

would someone please be able to point me in the right direction
thanks

The post is not that easy to follow but lets see what we can do:

A few general pointers first, please ensure you have receipts for everything.

Paying for goods with cash is a bad idea if you have a tax audit.

Taking cash out of the business account and calling it profit is pretty funky if I may say so.

Profit does not equal cash, the business graveyard is full of companies who thought that.

Cash is king, profit is an accounting concept where sales exceed the cost of sales.

You could do a lot worse than google for basic accounting
I did and I got 86 million hits, so u are not alone.

See http://www.businesstown.com/accounting/basic-terms.asp

It is american in format but it covers the basics.

You can also pick up a book on basic accounting in any good bookshop

To answer your question, drawing cash out of the bank does not go into the purchases book.

The essence of book-keeping is the concept of double entry, for each debit there is a credit
Any item is dealt with in the following "buckets" Income Expense Asset Liability.
[This is pretty highlevel- I may fall fowl of some of the purists on boards but wth!]

When u set it up first, if u put cash in the bank and it is a ltd company then the double entry is
Debit bank,[A] Credit Share capital [L]

When u take money out of the bank for petty cash
Dr petty Cash, Cr Bank.

Then when u say buy stamps from petty cash
Dr Postage Expense, Cr Petty Cash

For other purchases say stock
Dr Stock, Cr Bank

Then if u have a sale, for cash say
Dr bank, Cr Sales

Assume u sell all ur stock

ur profit will be sales less the cost of the stock and all the expenses such as postage

Look forward to your response:)

thetourist

thanks for your excellent reply - however i really dont have a clue at all about accounting - and apparently thats AFTER reading a basic accounting book cover to cover !!! ( oh god ) ..... anyway i obviously thought i had more of a handle on it than i did

Paying for goods with cash is a bad idea if you have a tax audit.

really all i'm referring to here is inexpensive things - some things i buy as part of the job for the customer are small and relatively insignifignant that i purchase from retail shops and i wouldnt even bother really marking up and it wouldnt pay me to purchase in bulk - so it's just a customer service thing ( say items under €15 - and often stuff for under €2 that i just want to pass on to the customer ) - or stamps for the business or stuff like that - are you saying that this is a bad practice because the alternative would be pretty awkward for me ??

To answer your question, drawing cash out of the bank does not go into the purchases book.

When u take money out of the bank for petty cash
Dr petty Cash, Cr Bank.

so should i have a daybook called "bank" then or what would i call it ?- and how would this tie in with my purchases book ? would the two work side by side, i suppose. and as i have a book called lodgements should the two be in the one daybook or seperate?

Taking cash out of the business account and calling it profit is pretty funky if I may say so.

i think the proper term is drawings or something - whatever it is i mean there must be some way for me to take money out of the business so it is worth my while - do you know what way i should record this - in the same book as above where i record the petty cash coming from the bank i suppose??

Cash is king, profit is an accounting concept where sales exceed the cost of sales.

yes but if my cost of sales is 20k and my sales are 50k, what's wrong with saying i made a profit of 30k and taking that 30k and doing what i will with it; reinvesting in the business, buying shares, or simply living on it??

The essence of book-keeping is the concept of double entry,

i thought that double entry was not always necessary especially in the case of small businesses - i read that on the revenue.ie site and i'm pretty sure in the accounting book i have

You could do a lot worse than google for basic accounting
I did and I got 86 million hits, so u are not alone.

See http://www.businesstown.com/accounting/basic-terms.asp

It is american in format but it covers the basics.

You can also pick up a book on basic accounting in any good bookshop

i know it must look like i havent tried any of this but all i can say is that's the cost of never learning ANY accounting or commerce or biz org in secondary school - only learned how to write a cheque last year and am still confused about the diff between credit and debit even though i've read the definitions 100 times!!!


thanks for your help

ircoha

Have sent u a PM re this as it is prolly best to take it further off line.
am not able to manage the edits on this stuff