If anyone can help me? Helping someone with their books using QB. Am going through the Bank statements - should I show cash withdrawals as owners drawings or should I show it as a transfer from bank account into Cash Account - not that he keeps any records of his cash account. Any help would be greatly appreciated. Nicky
If hes drawing out CASH for his own personal use I put put it to drawings. Sometimes you might find that they might draw out say £50 from the cash point as they don't think about drawing it out of their own personl bank account.
If hes paying for alot of stuff in cash and has the receipts to prove its for business it may be worth setting up a separate CASH account under the bank in QB's only so you can keep a tally on if hes paying for alot of stuff in cash. HTh
-- Edited by Amanda on Saturday 22nd of January 2011 04:01:13 PM
What I tend to do if there is no petty cash system, is to post all cash withdrawal to Drawings a/c ,Then I will post all payments that are not from business bank/ credit card to Capital Introduced. That way if they do have a tendancy to mix it up, it doesn't matter too much
I sometimes create a psuedo-bank account for all these transaction, then at the end of the month (or quarter/ year) move the balance either to drawings if there is a debit balance, or Capital Intro, if there is a credit balance.
Being really thick here! If I was coding it to drawings does anyone know how I would record it in Quickbooks (it probably would be the same in other pakages) Would I make out a cheque to the director and then code it to drawings. Again any help would be very much appreciated! Nicky
In QB you would write cheque out from Banking menu across the top directors name (or whoever it is to), date etc, and then code/post it to mine is "owners drawings". Then just Save and Close in the normal way.
HTH
PS I'm on QB Pro2008 I assuming its the same for other QB programmes.
What I tend to do if there is no petty cash system, is to post all cash withdrawal to Drawings a/c ,Then I will post all payments that are not from business bank/ credit card to Capital Introduced. That way if they do have a tendancy to mix it up, it doesn't matter too much
I have had a closer look at this tonight and can I just clarify a few things. If there is no 'cash account' - I should set up another equity account called capital introduced and charge it to that. The thing I don't understand is if say petrol was paid by cash I would want to code it to petrol expenses.
Also with Owners Drawings is it necessary to set up a sub account for Owners' Salary?
Just noticed in one of your last posts you mention that he is a Director, which changes things.
You will need to set up a directors loan account for non salary payments made to the Director. The rules for a director are different to that of a sole trader, or partnership.
It gets more complicated if he is withdrawing money to refund expenses, so you will need to find out why the money is withdrawn.
Hi there I am getting confused.!! At one point he was thinking of making it into a limited company - that idea has now been abandoned and he is definitely a sole trader. Going back to your original reply I don't think I really get the capital introduced idea - sorry I know I am being dense! Briefly - there are quite a few things paid for in cash - I don't want to show this as being paid by cash because no cash account is kept - what would I code that to? There are also a few things paid by credit card - again no accounts of the credit card are kept. His Salary - would I set up a sub-account of owners drawings and call it say owners' salary? Finally if cash withdrawals are coded to owners' drawings - when he has to do his tax calculation - wouldn't all the drawings be added back to the profit figure - so is it right that cash withdrawn would be added back to this figure. Again I really appreciate the help people have given me. Nicky
If I was you I would open a cash account then when you see cash has been taken from the current account just transfer that amount to the cash account then get all the cash receipts and make the payments from that accountto N/C if not for the business then put in to his drawings a/c
Hi there everyone - thank you for all your replies. Right think am sorted with the old cash payments. Liked Martyn's post of opening up a cash account, paying any payments by cash and presumably anything left over can post to drawings - am I right in my thinking?
The Actual drawings accounts - sorry still confused. I have just done an AAT unit BTC (I don't think I should admit to it!) When you get the net profits from the accounts, you then add back the salary or drawings paid to the owner as it is an appropriation of profit not a business expense - so don't drawings affect profit? I know I am in the wrong - any explanation would be greatly appreciated! Nicky
I think we are at cross purposes! The question relates to a sole trader, but S419 relates to ltd co's.
Nicky,
The scenario you mention seems to include salary paid to owner as a business expense. For a sole trader, this is wrong. The owner's drawings, or salary, do not affect the profitability of the business. If a business makes a profit for the year of £20k, and the owner decides he wants a new car and draws out £25k on the last day of the year, it doesn't mean that he's now made a loss of £5k. Drawings are processed through the capital account, which is part of the balance sheet, not the profit and loss account.
I think you may be getting mixed up with partnerships, where you can get 'partners salary' occurring. However, again it doesn't change the profitability of a business.
Nick Thanks for your reply and I understand what you are saying! I don't think I am explaining myself very well. If a sole trader makes a net profit of £10k If I have coded all cash withdrawals to drawings which amounts to 5K. When the accountant computes his tax he will add the 5k back (amongst other things) on to the 10k and he will be taxed on 15k. - Is this the correct way of doing things? Thanks for your help! Nicky
I don't understand why you would add back the £5k. If you were to do this, you must have deducted the £5k as a cost of the business, which as previously mentioned is wrong.
The only QB clients I have are ltd co's, so I'm not sure where drawings would go. However, I really can't believe that it is a P&L item.
Im using sage accounts line 50. I just finished AAT level 4 but I dont really have much experience and also Im not sure Im doing things right.
I started to work a few months ago with a LTD as a bookkeeper.Am going through the Bank statements and I realized that the Managing Director drawing cash from the company bank to baying stuff for the business. I have got some receipts from him but not all of them, its rolling since December and me waiting to have all.
I dont know what I need to do how I can put through these all in sage,and whats happening if is wont balance at the end?
Also they didnt employ anyone for 2 months before I have started here unfortunately more work for me to sort it out. By the way Am I allow to do work backwards very confusing! I saw the previous bookkeeper put lots of cash withdrawals under suspense account just before he left this job, was it correct to do so?
