I understand that cash accounts can’t be used in journal entries. So how would I account for this situation? A shareholder received cash payment from a customer and kept the money as a shareholder draw. To apply the payment to the customer is has to go into a cash account. So how do I clear that amount out of cash and apply it to shareholder draw?
See Make journal entries | Manager
In Manager, most transactions are entered in other functional tabs, thereby automating many decisions about account posting and reducing errors. So journal entries are relatively few. Most record transfers between accounts. In fact, no transaction involving the actual receipt or payment of funds by a business can be recorded via a journal entry.
Related is: Set up a bank or cash account | Manager
In addition to before, the shareholder will never have had a way to store the amount received temporarily from a customer. So the easiest is just to record a Payment against the customer and forget about everything else.
Letting the shareholder pocket cash without recording it anywhere isn’t good accounting practice or fair to the other shareholders. There has to be a way to account for this.
@esbyrt, assuming (a) you are using terminology correctly and the money you called a “cash payment” was physical cash or (b) a cheque was made to and deposited by the shareholder into a personal account, you need to enter two transactions:
- A receipt posted to a cash account (it does not matter which one), and
- An immediate payment from the same cash account posted to the shareholder’s capital account.
The important factor here is that no deposit was ever recorded to a business bank account. If that is not true, then the situation is not as you described.
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Thank you Tut! That is a straight forward solution.
Yes I was talking about physical cash that was never deposited.