Institute of Certified Bookkeepers
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July 2014 Question of the Month

  • 83 posts
  • # 100756

This month's question for you all to debate at your network meeting is:

You have a business owner who has a “cash out” option as part of their business, allowing customers to take out cash when paying for goods. At the end of the quarter the accountant gives you a journal to reduce the amount of income to cover the cash going out to customers.

Is this the correct way of dealing with “cash out” transactions?

  • Fellow in Practice
  • Practice Certificate
  • 2 posts
  • # 101068

If the cash out option is via EFTPOS there are two ways to process.


1. Bookkeepers who take the daily EFTPOS amount deposited into the bank account and treat the deposit as a 'sale'. 

    Not only is this overstating income, and gst collected but could also create a larger tax liabiity for the customer if not corrected.

    If the Accountant sees this occurring then they may create a journal to remove the cash out component from the sales figures.

This is not a good option as the Accountants will not know exactly how much cash has been distributed to customers - unless each withdrawl is recorded against a separate  'Cash out Account'


2. The correct method to process this cash out transaction is to review the daily Eftpos sales dockets and split the sales figures from the Cash out figures.  The cash has been distributed but will be refunded by the Eftpos daily settlement.  The sales should be recorded in an income account and the cash out should be recorded in a clearing account and reconciled to the daily Eftpos settlements when received into the bank account.  This also ensures the money is received and Eftpos transactions have not been accidentally deleted or 'Timed Out'.

  • 83 posts
  • # 101190

ICB's Response:

The income is not reduced by the “cash out” amount. The only area that changes is the way you report the takings for the day. Your physical cash will be down by the amount of the “cash out” but your EFTPOS will be up by that same amount. This means the amount actually deposited for the day doesn’t change.

For example, you (business owner), receive $50 in payment for a widget, and the customer asks for $50 cash out. Therefore you receive $100 payment, but only $50 is declared as widget income. When you give the customer the $50 cash, this is offset by the $50 received by EFTPOS.

All that has happened is you have moved money from one type to another. The income does not change. You still report the total income for the day, and there is no need to manually reduce the amount of income reported. All these movements should be reflected correctly in the z-read of the til at the end of the day.

By the accountant journaling out the cash, this effectively reduces reported income – which is incorrect, as this may result in under reporting income for GST purposes and income tax purposes.

ICB Resource - Cash Transaction Reporting

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