Client paid in cash, what now?

joy-riversidetre · ‎January 04, 2023

I have 2 questions regarding cash:

1. My client frequently takes ATM cash withdrawals and pays for various services with cash. He does not like to tell me what the cash is for, just says "to pay for stuff". I don't know how to class any of the withdrawals since he's not sharing that information with me. It's tough to reconcile the checking account since I'm not sure what to do with these withdrawals. What/how should I do with them?

2. My client also transfers money multiple times a day between 2 checking accounts - one for the business and one for I don't know what. Again when I ask what about the transfers he replies, "to cover other stuff". I'm unable to reconcile for the same reason above so same question, what/how should I do with them?

BigRedConsulting · ‎January 07, 2023

The safest thing to do, until proven otherwise by receipts provided by the client, is to assume the cash withdrawals or transfers to a non-business bank account are for personal expenses - are a reduction in Equity.

These will have no tax benefit to the business (are not expenses).

Use an equity account for them, perhaps one named "Owner's Draw" or similar.

Rainflurry · ‎January 08, 2023

@joy-riversidetre

@BigRedConsultingmakes a great point.

I would just add that, as a bookkeeper, you have a professional responsibility to confirm that these are legitimate business expenses and if your client is unable to confirm that they are, you may want to resign from the engagement. If the business owner has issues with the IRS, they could claim you made the entries on your own.

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Client paid in cash, what now?

Client paid in cash, what now?

Client paid in cash, what now?

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