It is my first posting on this forum. I am an accounting student currently doing bookkeeping for my friend who just started her own business. Because she doesn't have enough funds on her newly opened business account (and she can't arranged a line of credit for that account) she uses her personal account to pay her business expenses as she has a credit line on it. Should I reconcile her personal banking account? If so, how can I treat her personal expenses and revenues (she has other sources of income)? (the same questions apply to her personal credit card). What would you recommend in this case?
If a Limited Company from what I have read you should not use a personal account (you can use personal account for a short time but must be in the process of opening a business account).
If she is a sole trader not a problem. Are you using computerised package. I used to be a sole trader and was using sage, I had a part time job alongside and that went in the same personal bank account so I simply set up a nominal code saying ____wages already taxed (the line was the company name of who I worked for). Then for personal expenses they simply got posted to drawings code. Then for when tax return done the net wages received already on the sage accounts to put on the self employment part of tax return. This allowed bank reconciliations to be done.
Thank you so much for your suggestions! My friend is a sole trader; so, your suggestions should work in her case! When you are talking about a nominal code, do you mean I have to set up another revenue account for her salary from another company?
If you are using a computerised package, most have nominal codes. For example on sage main income one is 4000, so you could use 4001 for her salary from the other company. Just keeping in mind when you do the self assessment tax return that this code is for a salary already tax paid on but the net figure I believe goes on a employment supplement of the self assessment form.
