I’ve got a customer wanting to buy an item from me and pay by cash, and this is something I’ve never done before, because all my payments usually come through paypal. So I should create an invoice and mark it as paid, but what do I tag the cash payment to?
It’s only for £20 and I don’t think I’ll be hopping along the bank to pay that in, I’ll just take it as drawings - can I tag the cash payment straight to the proprietor drawings account (I’m a sole trader) or should it go to petty cash?
You can pay the invoice to the Petty Cash account.
If you then decide to bank the £20, just tag it as a transfer to your current account.
Thanks Glenn, tagging to petty cash seems sensible.
I doubt I would then put that in my current account though, would I be able to take drawings from petty cash and tag that to proprietor drawings?
I don’t see why not!
Because the inbound £20 is tagged as a payment to a sales invoices it will feature on your P&L anyway, this is what’s used to arrive at your tax calculation when you file your self assessment.
Standard Disclaimer: I’m not an accountant.
Cheers Glenn that makes sense.