Home – New › Forums › Money matters › How to account for withdrawals to top up float

  • This topic is empty.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • February 20, 2019 at 12:32 am #999322
    brownbag
    Participant
    • Total posts: 41
    Up
    0
    ::

    Our business is consignment based so when an item sells we pay them in EFT or cash for their component. We’ve been paying cash payments to customers from the till and it’s worked fine in general as we usually make more cash in sales than we pay out. We prefer to pay in cash as it means that they come into the shop and often spend. And we prefer to pay them out of the till than have a separate box for cash payments (it is a lot easier for various reasons).
    We originally withdrew $1000 from the bank and allocated it to an account called ‘float’. This is for change (as is usual for a float) but also for cash payouts to customers. We keep a large float so that we can cover any payments from customers who come into the shop early in the day.
    The float stays at around $1000 each day – we don’t actually log any activity in the float – according to the accounting system it is always at $1000 but in reality on any one day it could be $985, $1005, etc.
    When we do our weekly takings, the cash payments are added to the cash deposited and this makes up our cash sales for the week. It all works very well.

    But yesterday we didn’t take in much cash and paid out a lot of customers. We ran out of money and had to go to the bank and withdrew $500 to top up our ‘float’. That’s no problem – we covered our payment. But how do I account for that? We withdrew money from the bank, but where does it go? It can’t go into the ‘float’ account as it would then look like we had a float of $1500 and it’s still only around $1000. So how do I allocate this withdrawal?

    April 11, 2019 at 11:38 am #1218953
    ShellysBookkeeping
    Member
    • Total posts: 89
    Up
    0
    ::

    How did you record the payments out? The correct way would be to spend the $500 from the float as the expenses. Then when you withdraw the $500 to top up the float it would be coded to the float, bringing it back to your $1000.

    April 11, 2019 at 10:13 pm #1218954
    brownbag
    Participant
    • Total posts: 41
    Up
    0
    ::

    I worked out that it just needs to be allocated to cash clearing, then that account balances at the end of the week. In fact, if you don’t allocate the withdrawal to cash clearing the account would be unbalanced as there’d be too much money in the float. And as it’s not an expense, it doesn’t affect any expense accounts.

  • Author
    Posts
Viewing 3 posts - 1 through 3 (of 3 total)
  • You must be logged in to reply to this topic.