How to record income from a cash transaction

Heli2 · ‎January 29, 2021

Someone purchased a product from me and used cash to pay for it. I need to record this income, but am not sure how to do it in QuickBooks online.

I thought creating a Journal Entry may be the best way, but when I hit save and close, I received the known "please balance the debits & credits" error. This is the second time I've tried to make a journal entry with the same result - have yet to make one successfully. I have seen that this is an ongoing issue that's surprisingly yet to be resolved. So... what's the alternative?

CaitlinOG · ‎January 29, 2021

Hi Heli2,

It's great that you've taken the initiative and searched for a solution on your own. It sounds like what you did may be correct, but I'll share some information on cash sales with you just in case.

Typically when receiving a cash payment for something a customer bought, users will create a Sales receipt in order to record the sale. When doing this, they select the Undeposited funds account from the Deposit to dropdown menu. That way, the system knows that the cash has been received from the customer to pay for the product or service, but it hasn't been deposited into the bank yet. Once the money has been put into the bank, that's when a Bank deposit is created to tell the system that the funds are now deposited and that the cash is no longer on hand.

The reason I suggest doing it this way is that the Bank deposit function does show the money going into the company, however it doesn't create a sales transaction. To the system, the funds will be interpreted as money that's not related to a customer buying something, but money like a deposit to balance petty cash for example. I recommend checking out the following Community articles, as they go into detail about these processes and how this workflow looks from start to finish:

If you're still unsure about how this process works, please don't hesitate to reach out with any questions you may have!

View solution in original post

Heli2 · ‎January 29, 2021

I think I just figured this out... I created an account called Cash (under bank) in my Chart of Accounts. Then created a Bank Deposit to the Cash account. This records the income under the appropriate account in my Chart of Accounts, which in this case is income from product sales. Hoping this is correct!

CaitlinOG · ‎January 29, 2021

Hi Heli2,

It's great that you've taken the initiative and searched for a solution on your own. It sounds like what you did may be correct, but I'll share some information on cash sales with you just in case.

Typically when receiving a cash payment for something a customer bought, users will create a Sales receipt in order to record the sale. When doing this, they select the Undeposited funds account from the Deposit to dropdown menu. That way, the system knows that the cash has been received from the customer to pay for the product or service, but it hasn't been deposited into the bank yet. Once the money has been put into the bank, that's when a Bank deposit is created to tell the system that the funds are now deposited and that the cash is no longer on hand.

The reason I suggest doing it this way is that the Bank deposit function does show the money going into the company, however it doesn't create a sales transaction. To the system, the funds will be interpreted as money that's not related to a customer buying something, but money like a deposit to balance petty cash for example. I recommend checking out the following Community articles, as they go into detail about these processes and how this workflow looks from start to finish:

If you're still unsure about how this process works, please don't hesitate to reach out with any questions you may have!

Heli2 · ‎January 30, 2021

Ah, okay. That makes much more sense. Thank you! When I initially selected that, I didn't see the option to select the income account... now I see that I have to set up products & services that will link up to the appropriate income account. I was trying to find a work-around since I wasn't planning to add these to QuickBooks. I use Square... and the reviews on the QBO Square app that links transactions are pretty poor, so I wasn't planning to use it.

LauraAB · ‎February 01, 2021

Hi again, Heli2,

Thanks for those additional details. There are a number of ways to record various transactions, so it's about finding the best option for you. I can go over this a bit more to shed more light on these options so you can decide how you'd like to work with QuickBooks Online while handling the sales transactions via Square.

Finding an app you can have confidence in is important. I can definitely see how negative reviews would cause you to pause before selecting one, and in this case, there are a number of apps that can connect Square to QuickBooks Online. What you can do is visit the Apps tab in product, then type Square into the search bar on the apps page to see the available options. Feel free to scroll through, read reviews, and decide as you'd like.

In the event you have questions about the specific apps you're looking at, use the App Information section to find the contact details for the appropriate support team. If you find an app you like and works well for you, that's awesome! If not, you can consider other options like sales receipts, invoices, and otherwise to enter your customer transactions.

If you'd like to set up and track inventory, you're welcome to do that and this article can help: Set up and track your inventory in QuickBooks Online. There's also this option to manually track inventory if you don't have QuickBooks Online Plus, which is the package that includes inventory tracking: Can I track inventory manually in QuickBooks Online?

QuickBooks Online also comes with a couple of default items in the Products and Services section: Sales and Hours. Feel free to use those as you'd like as well.

If you're not sure which is the best option for you, I encourage you to contact an accountant. They'll be able to let you know how you should be tracking sales in your books for proper remittances to the government so that you can feel certain you're doing things right. The My Accountant tab gives you access to connecting with an accountant in two ways. The first is you can invite an accountant you're already working with as a user to your books, whereas the second, the Find a pro to help button, links you to our database of QuickBooks-certified accountants if you don't have one.

I hope this helps! Feel free to stop by community again. :)

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How to record income from a cash transaction