My question relates to UK accounting for cash and card payments we take on our bar.
I record the respective totals for cash receipts and card receipts as separate Sales Receipts with customer name "Bar" and deposit those sums to Undeposited Funds. This automatically generates three entries in Undeposited Funds:
1. Cash receipt - increase Undeposited Funds by VAT inclusive amount recorded on Sales Receipt.
2. Card receipt - increase Undeposited Funds by VAT inclusive amount recorded on Sales Receipt.
3. Card receipt - decreased Undeposited Funds by the net of VAT amount recorded on Sales Receipt.
When I remove cash from the cash drawer and credit it to petty cash or pay it into the bank, I create a bank deposit of the cash amount recorded under the Sales Receipt. This creates a zero balance for cash receipts in Undeposited Funds.
When I receive card payments from iZettle into my bank account, net of iZettle transaction fees, I create a bank deposit for the total amount recorded on the Sales Receipt, but record transaction fees as a negative (through "Add funds to this deposit") to that bank deposit. That negative amount is allocated to an expense account names iZettle fees.
This approach is based on other iZettle discussions in this community. Does it make sense? I am confused why the net of VAT amount is automatically recorded as a decrease to Undeposited Funds. After making the bank deposits above, I am left with a balance on Undeposited Funds equal to the VAT liability on the card receipt (but not the cash receipt). Am I doing something wrong?
Apologies for the length. As always, any help would be greatly appreciated.
Hey there, PH2019.
Thanks for the detailed information about your concern. This gives me a better idea how the transactions are recorded.
I'm here to clarify why the net VAT is automatically recorded as a decrease to your undeposited funds.
This can happen when the transaction is entered as a negative transaction. Don't select a tax code when you transfer and deposit funds to the bank.
This is because taxes are only entered on the cash/card receipts. To keep your records in order, I recommend checking with your accountant to see if the transactions fees should be recorded as taxable or not.
We’ll need to determine why the balance of the undeposited funds (VAT liability) is not equal on the cash receipts. I appreciate if you can send us screenshots, so we can drill down the transactions and make sure to black out sensitive data to protect the account.
This should help you move forward. Thanks in advance. Looking forward to hearing from you.
Thank you for your reply.
A screenshot of a simple set of entries to Undeposited Funds is attached.
Sales receipt 1175A represents bar revenue taken through card payments. That sum is not received into our current account until transferred by iZettle, net of transaction fees. Also attached is a screenshot of the bank deposit showing the iZettle transaction fees posted as a negative to the iZettle fees expense account.
Sales receipt 1176A represents bar revenue taken as cash.
Your thoughts would be much appreciated.
Thanks for the screenshots. Having looked at them the undeposited funds account appears to have a negative balance of 359.00 and the bank deposit screen where you showed us the fees being taken off shows a not deposited payment of a sales receipt for negative 359.00 with the same 1175A reference. Can we ask if you can send us a screenshot of sales receipt 1175A and 1176A so we can get a full understanding of this to provide you with the best resolution
Thank you for sending those screenshots from your account I think this is a loop back transaction where a transaction has been deposited and expensed from the same account. Can I confirm which account type has been used?
I post both card receipts and cash receipts to Undeposited Funds. No entries are made before this first step.
I then make a bank deposit of the cash to Current Account.
When we receive funds from iZettle, I make a bank deposit of those funds (less the transaction fees) to Current Account. On the bank deposit screen, I allocate transaction fees to a Cost of Sales sub-account named iZettle.
Thanks for responding.
We think we may need to take a further look into the account and this will be better supported calling our customer care team who's number can be located on this link here. This way we can set up a screen share check the transaction journals and the transactions journey to identify why it is posting in this way.