infosheet How to record Cash Sales      Return to menu
     
   Cash sales - a matter of honesty?    Cash sales may be great for business. You supply a product and receive payment at the point of delivery. You do not have to worry about the additional book-keeping work involved in keeping a sales ledger to record who owes you what. You also avoid the specter of bad debt.

There is, however, one minor problem. No one can prove beyond all reasonable doubt, that a cash sales business records all of the income they generate.

Indeed the Inland Revenue's own procedures manual draws attention to the fact that compliance officers should presume that the business proprietors will not declare all cash income.

Acknowledging that the majority of traders are honest, what steps can you take to ensure you don't get tarred with the same brush as those that aren't?
   At the point of sale    The most important objective you should have in mind, is to demonstrate that you have taken all reasonable steps to record all your sales at each point of sale.

We will be most likely talking about a till, in a retail shop.

However you record your day's takings, you should retain the paperwork as part of your accounting records. An absence of such records is almost inviting the question "exactly how much cash do you pocket and not declare"?

The best records you can maintain, is a series of till rolls for every day you were open during the accounting year. If you do use a till, make sure you set up the reporting function properly, and always keep the till rolls. Although you may just file the till summaries that most electronic registers produce, it is essential that you keep the underlying till transaction reports somewhere for inspection in the future.

Of course a dishonest trader wishing to hide income, only has to avoid ringing up a transaction on the till.

It is a fact, however, that the more formalised and complete the records become, the harder it is to buck a trend. Patterns of trading are always there, and a review of a year's trading figures can often show up even small discrepancies. If someone is under-declaring income, then it will show up in the analytical review of the year on year figures.

You can never prove that you have declared all of your income. But a visiting tax compliance officer is going to have more confidence in the accounting records you present, if there is a consistent and detailed paper audit trail from the daily till roll reports, through to the sales day books records you may produce that summarise the overall takings.

To assist you produce that paper audit trail, you should complete a daily till takings reconciliation.

This form essentially explains, what cash you have received in, and where it has gone. Starting with the till float, you should be able to show that the cash taken, less any expenses you have paid for out of the till, less bankings and the till float you leave in for the next day........ should equal the cash you have either banked or taken as drawings.

   Till reconciliation sheet   
The reconciliation form may look something like the one below. The detail does not matter, so long as the movement of cash takings in, and any expenditure out, are recorded down the page to arrive at the float left in the till at the end of the day.

Till reconcilation sheet


The amount of cash you take each day, will probably dictate how often you complete this form. Ideally the reconciliation should be carried out a daily basis, but every few day's will suffice.

We also recommend that should you use any cash from the till to pay incidental expenses, then you attach the receipts to the back of the till reconciliation form to complete the paper audit trail.