Pawn and cash loan accounting

by Sue
(Botswana Africa)

I operate a small Pawn business that pawns mainly cars.
For example, someone brings me a car worth say 20,000 and wants to borrow 5,000 I then park the car in storage, give the client his 5,000 and give him a month to bring me back
6,500 and collect his car. It works well but I am unsure how I should record it in the accounts.

I already have the petty cash and cash book up and running.
All cheques written out are captured in the cash book under their specific headings - ie what they are used for,Rent,Water, Wages and Goods purchased.

I am unsure how I should capture the document I give to the borrower. Should I record the original amount 5,000
or the amount including his fees 6,500

It is very confusing as sometimes the borrower does not return and then I keep the car for resale.

I would really appreciate your assistance in setting up a very simple set of accounts as I am a retired 65 year old trying to make a living and cannot afford to hire a fancy accountant.

Many thanks, your site is so very helpful


Hi Sue!

I'm glad you found my site helpful!

And, yes, this is a tough one! I've never done any accounting for a pawn shop, but I'm going to give you my thoughts.

When you're on what we call 'the cash basis' you record revenue when you receive the money, and you record an expense when you disburse the money.

The initial transaction
should be treated as a loan.

Which would mean we'd make an entry for the disbursement of cash and book a receivable for the loan amount, and then unearned revenue for the interest amount.

For example:

Pawn Receivable(asset)..$6500

Unearned Pawn Revenue(liability).....$1500

Cash in Checking.....................$5000

Next, let's say the customer comes back with $6500 to get their car.

You record this in two steps...

1.a receipt of cash

2.the earned income

Like this:

Cash in Checking.......$6500

Pawn Receivable...................$6500

This erases the receivable and records the cash received.

Unearned Pawn Revenue..$1500

Earned Pawn Revenue................$1500

This moves the income from unearned to earned.

OR, let's say they don't come back, and the car is now yours.

You now have an asset, worth $20,000, that you paid $5000 for. But in your business, any products that become yours are more like Inventory, like clothes are to a clothing store. And you record Inventory at cost.


Unearned Revenue(liability).....$1500

Pawn Receivable(asset)....................$6500

Then you sell the car for $15000.

Cash in Checking......$15000
Inventory.........................$ 5000
Pawn Revenue......................$10000

What I've done here is counted the car as Inventory for sale in your store. Then when you sell it, you have decreased your Inventory of products available to sell, so you take it out of your Inventory account at the cost you paid for it. The rest of the money you made is basically your 'sale'.

Does that make sense?

You mentioned above that you'd like some help. I'm going to send you a personal email, Sue, so look for an email from this website -


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May 15, 2017
in answer
by: Anonymous

Hi Anonymous,

I'd like to help, but you didn't give me enough to go on. What 'tables' are you trying to set up? What are you having trouble with exactly?

Maybe with that info I can point you in the right direction.


May 11, 2017
Getting books set up ..
by: Anonymous

I'm new at this and our company is having g trouble finding someone who understands the pawn business...I'm not understanding how to set up the tables..our software does not integrate with our quick books as well as some other transactions...can you point me in direction that I need to go to get started?...thank you for your time and attention to this matter..

Sep 01, 2015
your answer
by: Kathy


I'm not quite sure what situation you're talking about, so without specific information it's hard to answer your question.

That said, if you purchase an item to resell, and the purchaser offers to pay less than what you bought it for, you have a problem, don't you?

But how would you account for that on the books? Hopefully this is what you're after.

You have a Cost of Goods Sold for any item you purchase. Let's say you buy a used blender for $50. It's a great blender. You have this entry:

Purchases (COGS account)...$50

Cash in Checking....................$50

So, you try to sell it for $70. But it doesn't sell, and it doesn't sell, so you lower the price to $60. Then $50. Finally you sell the blender for $45.

You have a sale of $45, and a "loss" of $5.

Here's the journal entry:

Cash in Checking......$45


At the end of the month, when you prepare an Income Statement, you will show:

Sale of $45

COGS of $50

Loss of $ 5

Try not to have too many transactions like that one, right?

Hope that helps!

If that's not what you're after, send me an email or respond right here, and I'll try again.


Aug 26, 2015
consumer goods
by: Anonymous

What would the treatment be for items much lower in value that trade in/out between many consumers. ie blenders, ipads, guns, mowers.

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