One I come across increasingly is a sole trader operating a small business who uses their private bank account for all their business transactions. I'm always unsure about whether or not to analyse the bank account out in full as if it were a business account, all non-business transactions going to drawings and capital introduced, or whether to forego the bank reconciliation altogether and just post the final cash book balance to drawings. Just had one where they started in business this year, used their private account which had an opening balance into 5 figures! Capital introduced of 55k looks a tad strange when the turnover of the business is only around 15k. What would anyone else advise in this situation, where the business transactions only make up about 5% of the total transactions in the private bank account?
where I work, in a case like this we would simply enter the details for the business transactions and not bother with those that were personal, just means that you would not be able to do a bank rec
Thanks for the reply, I sort of suspected that might be the case. On the commencement of the business, start with a nil balance and then just record all of the business transactions into the Bank nominal. However, at year-end, would you then post the balance to Drawings (or Capital Introduced if the Bank were overdrawn) to bring the balance back to nil, or not post any drawings (or Cap Int) and c/f the balance in the Bank nominal as your Opening Balance for the next year?
Been away for a week so only just seen your reply, thanks. So if you leave the bank balance as is, do you not post anything to drawings? Presumably there's got to be a certain amount transferred to a Cash ac to cover any cash business expenditure so as not to leave an overdrawn cash ac?
