[Question] Shareholders loans / Money martket accounts on pastel

[Smartfin]

Please help, shareholder confusion.

Our partners receive commission from time to time on sales and have to pay company operating costs monthly. Each of them opened a money market account at the bank in order to transfer money to and from the business' current account. How do I process this on pastel? Do I create shareholders loan accounts or do I show their money markets as bank accounts on pastel?

[Dave A]

Who owns the money market accounts - the business or the partners?

From what you said, I got the impression these are financial reserves of the partners and not the business. Would that be correct?

[Neville Bailey]

An interesting setup, I must say!

Am I correct in my understanding that the commission that each partner earns is paid in full into their respective money market accounts, and that all of it is eventually spent on company operating costs, including their own salaries?

If so, then I would tend to rather open each money market account as a cashbook, rather than as a normal general ledger account, even if you classify each cashbook in the shareholders loan financial category.

A cashbook makes it easier to account for VAT and it allows you to process bank reconciliations.

Remember to process inter-cashbook transfers via a transfer account, so that both payments and receipts appear on the cashbook reports and on the bank reconciliation reports.

[Smartfin]

No, we do pay commission into their personal accounts like all the other agents, but on certain transactions they choose to leave money in the money market for the month end operating costs. It's almost like a buffer for them not to spend all their commission and not being able to pay their part of the operating costs. We also pay the PAYE/UIF and VAT expenses on each transaction into one of the money markets so that it's available end of the month when we need to pay over to SARS.

The money markets are in the business' name, maybe it will be better if I open cashbook accounts. If I open cashbook accounts, how do I keep it in the Shareholder loan financial category?

Thanks for the help, I am very confused about this

[Neville Bailey]

If I open cashbook accounts, how do I keep it in the Shareholder loan financial category?

Quite simple, really.

There are two steps in creating new cashbooks in Pastel, i.e.

• Create a general ledger account for each new cashbook, by going to Edit...General Ledger...Accounts. Make sure you assign the new accounts as Balance Sheet accounts, and then, in your case, in the section named "Balance Sheet Financial Category", select the option named "Shareholders Loan" (usually a cashbook account would be allocated to the "Bank" financial category).
• Set up each of the new general ledger accounts as cashbooks by going to Setup...Entry Types and, using your existing business cashbook setup as a guide, create the two lines for each of the new cashbooks.

[Smartfin]

Pastel does not allow me to setup those accounts as shareholders loans, it says it must be an unallocated balance sheet account or a bank account.

The other thing is, these accounts haven't been balanced before to the bank statements. The people who use to do the books made bit of a mess with things. How can I rectify these accounts to balance to the bank statement?

[Neville Bailey]

Pastel does not allow me to setup those accounts as shareholders loans, it says it must be an unallocated balance sheet account or a bank account.

Hmmm, you are quite correct - I've just tested it! Not a big deal though, as long as you are able to identify those cashbooks, you can manually categorise them as shareholder loans in your management accounts.

The other thing is, these accounts haven't been balanced before to the bank statements. The people who use to do the books made bit of a mess with things. How can I rectify these accounts to balance to the bank statement?

It can probably be sorted out, but it isn't practical to tell you how to fix it on the forum. It will require a hands-on approach, with your bank statements on hand, as well as access to your Pastel database. Let me know if you would like me to assist you with this - we can arrange a preliminary TeamViewer session (no charge) so that I can assess the situation and then prepare a quote for you.

[Smartfin]

The members will decide tomorrow if they want the money markets to be cashbooks or general ledger accounts.

I have another question though, when they pay money into the business for operational costs (not from the money markets, but from their personal accounts) do I note it as Capital in Pastel?

[Neville Bailey]

I have another question though, when they pay money into the business for operational costs (not from the money markets, but from their personal accounts) do I note it as Capital in Pastel?

I would create a sub-account for each shareholder under the Shareholders Loans main account.