I'm a sole trader, and this will be my second fiscal year trading. I've been a good girl and kept on top of my books every month, but I'm puzzling through what I'm meant to do with the money left in my account from the previous financial year. It's not profit because, well, it was there last year. From all last year's business.
How should I note it down in the accounts?
For example, if there was £200 in my business account at the beginning of April '10, how do I account for that? I've been deducting it each month from the total gross amount of money going in, but I'm really not sure if that's the right thing to do, and I'm struggling to find any information on what to do.
Many thanks in advance for your help, and I'm sorry if this is one of those terribly basic questions!
It's just the opening balance, you shouldn't have to do anything with it.
Unless you have invested is assets/stock or have debtors or creditors, it should just be the balance of the net profit which you haven't drawn for your own personal consumption.
Are you saying that after receiving all your sales, paying for all your expenses and withdrawing money for personal use (drawings) that you are left with £200 in your bank account at the end of your first year.
If so then this is just your opening bank balance for the 2nd year and your balance sheet at the start of your 2nd year (assuming you dont have any other assets or liabilities will be.
Bank £200
Capital Account
Capital Introduced X
Add Profit for 1st year x
Less Drawings x
= Capital at end of year £200
So after your first year of trading you have accumulated £200 worth of net assets
