Hi Cora,

A few things...

1. If the owner is making purchases on behalf of the company, i.e. the owner is incurring an expense personally (and it sounds like this company is NOT incorporated, but rather a sole proprietorship?), this is, in essence, an owner's contribution to the company and can be handled with a general journal entry, for example:

      Feb 16     5700 Office Supplies Expense                 53.96
                      3010 Owner's Contributions                   53.96
                   To record the purchase of printer ink by the owner.

In this instance, the owner is never 'paid back' the out-of-pocket cash as it is handled through the owner's capital account. NOTE: the vendor from which the expense was purchased, in this case, say the printer ink was purchased from a store like Walmart or Staples or Office Depot or Grand & Toy, etc., that is not relevant, so resist the desire to want to enter a purchase invoice from the vendor.

2. With regards to Petty Cash, this is asset account (very much separate from the accounts associated with the owner... completely different section) and should be reconciled on a regular basis... in that process the expenses incurred are put to the appropriate account. For example, on a simple level:

      Mar. 31     5700 Office Supplies Expense               12.95
                  5784 Travel & Entertainment                 5.99
                       2100 A/P--Cora, petty cash custodian       18.94
                    To record purchase of name tags and plastic cups for client entertainment.

      Mar. 31     2100 A/P--Cora, petty cash custodian       18.94
                       1060 Bank/Cash                             18.94
                    To record petty cash replenishment.

3. With regards to year-end procedures, the revenue and expense accounts are closed out at year end as part of the accounting cycle so that at the start of the new fiscal year they should have a $0.00 balance; what ends up happening is that the revenue and expense accounts will eventually be closed out to the owner's accounts. A/R and A/P, on the other hand, are never closed out at year-end as you DO need to know when the new fiscal year starts, what you are still owed, A/R, and what your outstanding liabilities are, A/P. Here's what Sage is doing in the background during year-end, again, really simply:

      Dr. Revenue Accounts                     20,000
      Cr.      Income Summary Account               20,000
             To record the closing of revenue to income summary.

      Dr. Income Summary Account               15,000
      Cr.      Expense Accounts                     15,000
            To record the closing of the expense accounts to income summary

      Dr. Income Summary                        5,000
      Cr.       John Smith, capital account          5,000  
              To record net profit to owner's capital account.

      Dr. John Smith, capital account           2,575
      Cr.      John smith, withdrawals               2,575
              To record withdrawals made by the owner.

You won't see an "income summary account" in Sage50 as that is one of the 'background' functions the accounting software is handling for you... I had to learn that the hard way LOL after spending hours researching it out.

Hope that helps on some level.

Best,
Kristine

cora said:

I also post vendor expenses that get paid the following year but are revered in the New Year i.e. January 1.

Are these essentially accrued expenses for services / goods provided in 2017 that weren't invoiced until 2018?  

Or the opposite - prepaid expenses, invoiced in one fiscal year, i.e. 2017, for goods / services to be provided in the following year, i.e. 2018?  

In either case, the year it is paid does not really matter, only the year(s) that the expense affects.

cora said:

For some reason my notes for Year End procedures indicate that I should clear Account 2110 to Owners Contributions  

This may have been correct for some prior year(s), when no other prepaid or accrued amounts were recorded.  Only the unreimbursed Owners' expenses should be cleared against that account.

Thanks to both of you.

I needed to refresh my memory on this as year-end accounting procedure only happens once a year.

You're welcome!