Please, I want you to give me guideline on how cash book for a company that doesn't base on sales will look like.

by Amosu Segun
(Lagos, Nigeria)

Question From Ask the Expert:

The company I work for is a type that doesn't sell any goods but purchases product and stores it for a certain period of time and then exports it.

1.How should the Cash book look like(the format)
2.What kind of account would be required
3.How would they look like? (format).


Unless this company is doing this out of the goodness of their heart, there is still some kind of income and expense going on here.

This company is buying products, so there is your Cost of Goods Sold, or your "Purchases" account (expense).

The act of buying product is a business transaction, and the entry would look like this:

Debit - Purchases (expense)

Credit- Cash (asset) or Accounts Payable (liability)

This company is storing the product - so either it owns a warehouse, which entails maybe electricity expense, security expense, etc. - or it rents warehouse space, which entails rental expense.

Then when the company ships the product (exports) somewhere, there is a cost associated with this, too, shipping expense.

So after those expenses, there has to be some kind of sale, even if it's to another company owned by the same people.

Otherwise, the company would be spending cash to purchase products, store them, and ship them, using their own money and getting nothing in return. This doesn't happen. Look into the situation further.

Check out my page on Cash Management, on the navigation panel to the left. Pay particular attention to the Cash Disbursements Journal and Cash Receipts Journal. This is how you should set up a system to record your cash payments and receipts.

Also, check out my page on a Chart of Accounts, found here:

Hope that helps!

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