Difference between cashing account and account payable

[squick2010]

Hello,


I am having a little bit of a confusion with my book keeping software.

When you create multiple journals in the chart of accounts, you have to create a business account that receives the all of the incomes.

Right now in my software, I can see 2 different templates, one called:

Account payable, set as a liability
and
another one called:
Cashing account, but this time it is set as an Asset.

Any idea what is the exact difference in terms of real life example?

Would a payable account just be a Business account and a Cashing account be the cash machine in a shop?

Thank you,


Ben

 

[Arch Stanton]

Hi

An account payable would be used for your suppliers (people you will be buying goods and services from).

I expect cashing accounts would be used for your bank account(s), cash control and credit cards.

Is your software American?

 

[squick2010]

Hello Arch,

Yes the software is American, call express accounts from NCH, this is probably why the terms are a little weird. I used to have quickbooks in the past and do not remember it used the same wording for the journals.


So if you are 100% right, this means that the software will automatically deduct the money from the account payable to the cashing account, isn't it?
Otherwise I will have 2 types of accounts with 2 different balance.

What do you think please?


Thank you,


Ben

 

[squick2010]

Ok,
This is from Wiki:
Accounts payable is a file or account sub-ledger that records amounts that a person or company owes to suppliers, but has not paid yet.

This means that it is not good for me because people must pay online for the goods before getting them.

So I believe that the cashing account will be right for me, I will record the sale immediately after the purchase.

 

[Arch Stanton]

You would set up an 'accounts payable' account for each suppliers to you business, eg other business that raise purchase invoices to you.

The software probably allows you to set up accounts receivable as well. You would use these for your customers if you raise invoices to customers and wait for them to pay you.

As your customer are paying online you will probably need to set up 'cashing accounts' for your own bank and paypal (or whatever). Then you would record the gross receipts from customers into the paypal account, and payments out for any transaction charges and transfers from paypal to your own bank.

If that helps.

 

[Arch Stanton]

I also suggest you make sure that your software is designed for the UK. If not you would be best off getting recommended UK specific software.

 

[squick2010]

Hi Arch,

Thank you for the reply,

I have 2 more questions please,

When you create a payable account and do your V.A.T return, will the payable amount(or amount which has not reach our bank account yet) be calculated in the V.A.T return or not? Logically I would think that we will need to move the money form the payable account onto the cashing account after receiving the payment and only at that time, the payment will be added to the V.A.T return, am I right?

Finally,

When you create an invoice for someone outside EU, do you just create the invoice with your company number, and V.A.T number as well as if you were selling in EU or not?

Thank you,

Ben

 

[squick2010]

Hi Again Arch,

Actually it is even worse than what you think...., I am living in Malta, and we do not have our own Maltese accounting softwares, therefore we base ourselves onto what you use in UK, but still the vocabulary is losing me out a bit(English is not my first language). I had quickbooks and their support told me not to use it in Malta....Great, money spent for nothing.

But I am nearly there with this software which is apparently compatible with any countries in the world.

The last thing I am suffering with right now is the way the software handles each journal account, I also forgot to say that their help files is not working on my 64 bit machines, that's why I struggle so much, their support is also not responding...:-(


When you create a journal account, it ask for this:

Is the account a cash postable (eg, credit card or bank)

Next menu is:

Default linked account for:<---this is the one I struggle with
The choices are:
-Deposit account
-Account receivable
-Income account
-Freight collected
-Sale Tax collected
-Sale Tax Paid
-Account payable
-Freight Paid
-Expense account

No here is where I get lost:

I have created 2 bank accounts as one of the Forum helper told me to do:

one called:

-HSBC Business account

and one called:

-Paypal Business account

Both are set as Assets accounts and not liability(Hope I am right on that)

And here is the prob, all my sub accounts, mp3 sales, games sales and other income accounts have the "Default linked account for: -Deposit account" selected, I believe this means that when I will input a receipt in those income accounts, the balance should be sent directly to the Paypal account.

The problem is to what will happen to the HSBC account? I cannot set it also as a deposit account or the income accounts will both send their balance to the Paypal AND the HSBC account doubling every input....does this makes any sense? It is very hard to explain sorry.


My plan was to set only the Paypal account as a deposit account and link all the sub journal income account to this deposit account. I have not choosed anything for the hsbc account.

Any idea what you would do in this case please?


Thank you,

Ben

 

[Arch Stanton]

When you create a payable account and do your V.A.T return, will the payable amount(or amount which has not reach our bank account yet) be calculated in the V.A.T return or not? Logically I would think that we will need to move the money form the payable account onto the cashing account after receiving the payment and only at that time, the payment will be added to the V.A.T return, am I right?

A payable account will be used for your suppliers and expenses, not for your customers and sales.
So the usual posting for a supplier's invoice would be from accounts payable to expense account. And when you pay the supplier, the payment will go from the bank to accounts payable.
A similar process works for customer sales invoices and accounts receivable.

In the UK VAT can be accounted for on an invoice basis (at the time the sales invoice is raised or supplier invoice received) or on a cash basis (when bank or cash payments are received or made).

So need to set up the software to account for VAT in the way you want.

I am not sure if your american software will handle VAT correctly or what the VAT rules are for Malta.

 

[Arch Stanton]

And here is the prob, all my sub accounts, mp3 sales, games sales and other income accounts have the "Default linked account for: -Deposit account" selected, I believe this means that when I will input a receipt in those income accounts, the balance should be sent directly to the Paypal account.

The problem is to what will happen to the HSBC account? I cannot set it also as a deposit account or the income accounts will both send their balance to the Paypal AND the HSBC account doubling every input....does this makes any sense? It is very hard to explain sorry.


My plan was to set only the Paypal account as a deposit account and link all the sub journal income account to this deposit account. I have not choosed anything for the hsbc account.

It seems odd that you have to link your income accounts to either a deposit account or accounts receivable.

As it says linked to deposit account I expect you will be able to post customer receipts from both the HSBC and paypal accounts as they are both 'deposit accounts'. I doubt very much that the software will post duplicate transactions.

I think you should be okay setting the HSBC account as a deposit account.

 

[Arch Stanton]

Here is someone else who tried using Express Accounts from NCH.