This is my first post so I hope somebody can help.
Basically, I have started up as a sole trader doing an ebay business. I have a spreadsheet setup in excel with Sales, Purchases, Mileage and Final Summary.
I have put £500 Capital introduced from my personal money and then I have bought stock from the business account for £500.
How do I log this on my spreadsheet. Is the capital introduced a negative figure? Also where do I log this? Under Sale? Purchase?
Start with the capital introduced figure. you have loaned that to the business so the double entry is a credit for the capital introduced (money owing to the owner of the business) and a Debit for bank (being an asset of the business).
As you make payments from the bank you enter those as credits against associated debits for things such as purchase of assets or expenses.
The stock that you mention is a current asset. The double entries then we have so far are :
Cr Capital Account
Dr Bank
Cr Bank
Dr Stock.
Income is recorded as a credit, expenditure is debits. At the end of the period the balance of the P&L is carried to equity as Net profit or loss (so can be carried over as either a credit or debit). The act of doing that reverses out the P&L balance by adding it to equity allowing you to start the P&L again the following year.
Its all way more complex than that with supplier and client accounts to be taken into account, accruals, prepayments, different stock in the P&L to the current assets (well, its the same stock but its how you process stock at period end).
How you log the double entry in a spreadsheet is very much down to yourself as spreadsheets are very much sandbox type software where you can pretty much design it around what makes sense to you.
If you want to understand the basics of bookkeeping I would advise reading Business Accounts by David Cox which is a good introductory book for the professional and the lay person alike.
If you decide that you need professional help rather than doing it yourself I'm sure that there would be someone on the site local to you (I mainly cover North Staffs and the West Midlands).
Just as a warning. For the type of business that you are going to be running make sure that absolutely everything is squeaky clean with invoices for everything, a well maintained mileage log and a seperate bank account where you can tie up every entry as the business that your going to be running is one of those thats on HMRC's current hit list (along with private tuition, restaurants and umbrella companies claiming to be IR35 compliant).
Good luck with the new venture,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you for the reply. I am currently in the west midlands.
Bit confused as to what you just said about the capital introduced.
So basically I put capital introduced as a positive number? i just have a simple spreadsheet with 4 tabs. Sales, Purchase, Mileage and Overview (which calculates it all). I'm taking all data from my Payapl history as this is where all funds are going to and taken from.
Still can't get my head around this Capital Introduced method :(.
Its a simpler concept when its a limited company as thats a seperate person whereas with a sole trader one is the same as their business. However, try to think of the two as seperate entities.
You, the owner have loaned £500 to the business. The business owes you that money so as far as the business goes its a liability.
As a liability (money owing to someone else) it is recorded as a credit.
Now being double entry for every credit there has to be a debit. Your debit is where the money loaned to the company goes which initially is into the bank.
So, you have :
Cr Capital Account. £500
Dr Bank £500
Now you want to spend the money on stock so the money comes out of the bank (a credit) and you have purchased the asset of stock (which is something that the business possesses which is a debit).
Double entry is :
Cr Bank £500 (so bank is now zero).
Dr Stock £500
I think that the spreadsheet is confusing rather than helping matters as you need to understand what is happening before attempting to computerise it.
How you record your debits and credits in a spreadsheet is down to the design of the spreadsheet. The main thing is understanding what it is thats happening with your books and why every figure needs to be recorded the way that it is.
The Cox book should help get a basic understanding of that without being too heavy going.
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think what you are doing is a single entry bookkeeping, not double entry. This is perfectly fine for you, in essence just listing what sales you make and what purchases, expenses you incur. This largely forms your profit and loss account. The capital introduced is a Balance Sheet entry so it gets a bit more confusing. If I was you, I'd just make a new tab and call it 'Capital Introduced' and put your £500 there and enter the £500 for stock in your purchases tab. Shaun or whoever you may get to look at the accounts will unravel it from there.
