i have a client who has started a business in april 10.
He is still paying for some expenses out of his personal account and some out of the business account. In Sage, i have created a business and a personal account.
At thesame time, he is able to make some drawings every month - entered as drawings in sage.
Thus far, the amount paid from personal account and the amount of drawings taken are more or less thesame.
For self assessment and tax savings purpose, would i be better entering a journal into sage to DR/CR the persoanal and drawings account?
It is best to keep the Business Bank account separate from his private account. When he started the business he would have introduced capital into the Business bank account and all Receipts and payments would go through that account. If the business a/c runs short of money he can then transfer from his private a/c into his Buiness a/c and you would do a journal entry into sage Dr bank a/c and Cr Capital Introduced. At the end of the year the Tax man wants to know how much taxable income he has made, which is irrelevant to drawings
From what you're saying, it sounds like he's roughly re-introducing the same amounts that he's taking out!
It would be a lot cleaner if he didn't draw the money out and paid for everything from the business account. Of course, what we see as being easier doesn't always happen!
When you come to do the accounts, it would be a good idea to net the payments from the personal account against the drawings. In essence, it doesn't seem like he is introducing cash into the business - well, I suppose he does, then he draws it out, then he re-introduces it, then draws it out again, etc.. It seems like you're talking about the same money.
Another consideration is that HMRC may become 'interested' if the tax return shows cash introduced, as (depending upon the business type) they may question where it came from and/or whether it's actually income.
