Discussion:Petty Cash Account Mess = Non-Deductible?
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PurpleBrain (talk|edits) said: | 1 January 2009 |
| A new client brought me a trainwreck of a QB file. One (smaller) issue is the petty cash account balance of $1,700 w/transactions from 2005-present.
The client asked me, "What's the petty cash account used for--it's not a "real" account is it?" Ack! Anyway, there's only two transactions in there from this year; one's supposedly all travel-related expenses, and the other's not accounted for. Receipts not on hand. I need to get this account down to zero, as the client will not be using it in the future. I cannot justify expensing any amounts to say, office expense, etc., without proper receipts. So, leaves me with non-deductible expense? Best option? | |
| 1 January 2009 | |
| I would ask the client how the entries got there. QB may be a piece of crap (my opinion) but it doesn't usually create entries out of thin air.
I have a client who uses a petty cash account for expenses that were paid by cash or from personal funds. Then periodically she issues a check to herself for reimbursement of the expenses which are deductible to her company. Perhaps that is what is going on here. Have you reconciled the QB file to tax returns? Perhaps the tax preparer adjusted the petty cash account in prior years and you just need to enter the adjusting journal entries in the QB file. | |
| January 1, 2009 | |
| If the client was treating it as an "unreal" account, I would either record the adjustment as a nondeductible expense or as a draw/distribution depending on the type of entity and other facts. | |
PurpleBrain (talk|edits) said: | 1 January 2009 |
| TTMM: All entries were made by the client as "transfers" from the biz checking to the petty cash account in QB dating from '05 to the present. No, I haven't asked for the returns, although I'm subject to simply call the CPA directly tomorrow and ask, as I have a couple more questions regarding 12/31/06 journal entries she made sending monies TO the despised QB OBE account.
Natalie: The client's an S-Corp, accrual basis. The client made these transfers from checking to the petty cash account in taking out the cash for small purchases. Typical problem being that the account wasn't adjusted per receipts as purchases were made. Now, the amount's material, and I certainly don't want to just expense it to office expense. | |
| 3 February 2009 | |
| Sounds like it is Cash out of the bank and used by the client.
Now he has to tell you where it went - by expense type. Good luck. I generally leave and make them give me a list that totals when I get back. Bill | |
| 5 February 2009 | |
| The client doesn't know then send the balance to Shareholder loan. | |
| 5 February 2009 | |
| I usually make them write "I will keep all receipts for petty cash activities" on the chalkboard 500 times, and no recess for a week. I also bill them an additional fee equal to the amount of the unreconciled petty cash balance so I can simply write off the balance to accounting fees. | |
PurpleBrain (talk|edits) said: | 15 February 2009 |
| Bilbo and AEM CPA: Good plans! ;o) | |
