Sage Accounts Help Please - The Book-keepers Forum (UK)

NewStar · Member

Sage Accounts Help Please

Wella · Expert

Hi Newstar and welcome

You would treat the accounts of a sole trader in the same way you would a LTD company.

You would need to change the Chart of Accounts to reflect Capital rather than Ordinary shares etc but the day to day Bank account transaction would be the same.

If the soletrader does not have account customers or suppliers, you can make payments from bank and cash accounts in the Bank > [bank Account] > Payments (or Receipts) for day to day transaction, just the same as for a LTD company.

HTH
Bill

Julie Hall · Senior Member

Hi there, you would use sage in almost the same way but you would have to allocate some expesnes/data input to different nominal codes for example there would be be no directors loan account but would be a drawings (for example 3280) and capital introduced account (3250), it would probaly help if you read about the main differences between a sole trader and limited accounts and then you would probably understand the different nominal codes that should be used. Hope this helps.

NewStar · Member

Many thanks for your replies, that has helped very much.

One last thing though, if the sole trader has a business bank account but also uses his personal account for things such as telephone, meals etc how would they be recorded? as a cash payment to the drawings account? or would you record them somehow in the appropriate nominal codes?

thanks

Wella · Expert

There are various ways this can be done. Your way would work

I prefer to post personal payments as CR Capital Introduced and DR [Expense] Account, then if the money is repaid, post to DR Drawings CR bank/ Cash Account. Just to keep things separate. I find that (my) clients tend to not always take the money back out, or never the same amount. This way it doesn't matter.

Bill

NewStar · Member

Ah so personal payments can just be recorded via the journal entry module in Sage, much the same as manual bookkeeping?

Many thanks, i was confusing myself by reading too much into it!!

Wella · Expert

I am pretty sure that you can make a payment in the bank module to post a payment to drawings using the 3*** nominal code for drawings. It's a bit simpler than using the journal function

PhilMcTankup · Senior Member

Yep, reckon so Bill.

Just lost my Avatar trying to load up a smaller one (sigh)

NewStar · Member

Ok but (forgive me for my ignorance) If i posted a payment from the bank module to drawings it would CR bank DR drawings

So how would the expenses account come into effect? or would it not need to?

thanks

attilabenko · Guru

Hi,

in effect it would be two separate transactions. As he is paying with his own money for expenses first you would have to account for the money as extra capital (capital introduced and bank/cash) than make a payment for the expense (bank/cash and expense account). When he takes (the) money out from business just account for it as drawings (bank/cash and drawings). I think this is what Bill was saying and I would do the same. As he said they often not taking the same money out what they paid for expenses. Sole traders are tempted to treat their business not as a separate entity but as themselves...

semsley · Guru

attilabenko wrote:

As he said they often not taking the same money out what they paid for expenses. Sole traders are tempted to treat their business not as a separate entity but as themselves...

But Attila, that's the whole point of a sole trader the business is not a separate entity. It's when a sole trader decides (sometimes) to become Ltd when the problems arise because s/he has got used to taking money willy nilly and finds it difficult to comprehend that the Ltd Company is a separate legal entity and s/he can't use it as a piggy bank to be raided at will.

RobH · Expert

I quite often use the petty cash bank (1230) and rename it 'personal'. make all personal payments from there and at the end of the year do one journal debiting 1230 and crediting capital introduced. Anything for an easy life!

Rob

attilabenko · Guru

Hi Sheila,

That's true,too. With sole traders there isn't real separation of business but should be. When I am preparing the books of a self-employed, normally I am preparing business books,no? So ideally they should have a business/separate bank account and all personal payments should go through capital account in some way or form. Doing journal entries once a year is probably even easier.
The separate entity concept applies wheter the business is a limited liability company, a sole trader or a partnership. Regardless is it recognised in law or not as a separate entity in accounting it is. Am I not right?

NewStar · Member

Many thanks for all your replies, i think i have got my head around it!!

All i am not to sure about is once all the expense have gone through the cash/bank i.e

CR Capital Introduced DR Bank/Cash
DR Expense CR Bank Cash

That would leave the bank at a zero figure, so when (and if) the sole trader takes money: CR Bank/Cash DR Drawings that would leave the bank/cash with a negative figure?

attilabenko · Guru

Because you spent the money...if you did not spend it on expenses but only put money in and than take it out would leave you with zero balance

attilabenko · Guru

Hi Sheila,

Back to the separate entity business. Yes small ltds as you said. Just had one of those box jobs. Ltd, but did not process cash receipts for one and a half years - and VAT registered. Just had to post a sandwich and a drink for every day of this period to directors loan a/c, supermarket shopping for business (food and drink business) plus a personal meal on company money. Would not bother if it is one off but every day over 18 months is £1700 so yes agree, can be worse than sole trader accounts ;)

Wella · Expert

NewStar wrote:

Many thanks for all your replies, i think i have got my head around it!!

All i am not to sure about is once all the expense have gone through the cash/bank i.e

CR Capital Introduced DR Bank/Cash
DR Expense CR Bank Cash

That would leave the bank at a zero figure, so when (and if) the sole trader takes money: CR Bank/Cash DR Drawings that would leave the bank/cash with a negative figure?

Don't want to confuse matters but I wouldn't involve the bank/ cash accounts if its a direct expense payment by the owner. I would Dr Expense and Cr Capital Introduced as a single entry. The only time I would involve the bank/cash accounts, is when money is repaid, because that is where the repayment is coming from.

Hope that made sense

Bill

attilabenko · Guru

Hi Bill,

I agree. In fact if it is happening regulary I would do what Rob said and on this way capital a/c would stay uncluttered by small transactions. I was just trying to explain the logic behind it.