This may sound like a silly question but I can't quite work out what to do. Is this correct for year end?
I run year end in Sage. I then journal P&L to Capital and Capital to Drawings.
The client is small and takes all profits as drawings throughout the year. The problem is, this is not reflected in the bank account. It just keeps increasing and increasing but the reality is the money is transferred out for personal use. What do I do on Sage to get the bank balance back down for the start of the new year?
Before running year end, should I have done a bank payment for the full profit amount with the drawings nominal code?
Yes, if all other items on the bank statement that aren't business expenses are drawings then put through a payment to physically move this amount to the drawings account.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Are you reconciling the bank each month? I'm not sure what you mean when you post that profit / drawings aren't reflected in the bank account. Is all the income banked? Are all expenses paid via the bank account? How are cash movements recorded?
You should actually post drawings to capital.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Thank you for your help. Sorry it's taken me a while to reply, I have a little one and only get to work part time.
Tony - this is a sole trader and there are a few expenses that come out the business bank account but mostly it all just gets transferred to his personal account. I basically just get an envelope of receipts here and there. So no, I'm not reconciling the bank each month as it isn't really appropriate because nothing would add up. Sorry if I wasn't clear about the capital. I know it's CR Drawings Dr Capital and Dr P&L CR Capital to transfer the balances to the capital account.
Budget B - I have done a bank payment to drawings for the bank balance before running year end. (I realised that I couldn't do the full profit amount because there wasn't that much money in the bank account, some of it was still tied up as debtors). Thanks for confirming that for me, I wasn't quite sure if that was the right thing to do. It all seems to have worked nicely so thanks for helping me on that guys.
