Unrecorded Bank Deposits

by Gayle
(Calgary, AB)

How To Enter Unrecorded Bank Deposits

How To Enter Unrecorded Bank Deposits

My question is what if you came across deposits on a bank statement but no invoices were issued.

Would a sales log from the client satisfy Canada Revenue and how would you deal with the GST?

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Hi Gayle,

When you have deposits that have no corresponding sales invoices, you need to consider the possibility that:

  • The owner may have made a contribution to the business; or

  • Perhaps the source of funds are proceeds from a loan ... maybe from a bank or a friend; or

  • It could be that they are proceeds from the sale of an asset; or

  • The owner received a customer deposit in advance of the work being done or the product being sold.

A common bookkeeping error is to record these types of transactions as income.

Until you can speak to the owner of the business with regards the source of the funds, book it to Other Income net of the sales tax. Click here to learn how to backout and book the GST.

Once you talk with the owner, you can correct the transaction(s) if necessary.

If the deposits are indeed sales, the sales log is definitely okay to use as your source to record the transaction(s).

Consider creating "sales receipts" in your accounting program to book the unrecorded amounts to your Sales Revenue / Income account instead of Other Income. Reference the log when creating the sales receipt.

What's important here is to capture all income so as to not under report sales which could trigger an audit ... and /or to have proof that the funds deposited to the bank account are not income.

Take the time to follow links the I have provided you to get a better understanding of the issues you may be looking at.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

I apologize to my readers ... but while converting this submission to upgraded software, I lost all comments associated with this posting. The post was originally submitted in August 2011. Lake

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