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Post Info TOPIC: Capital Introduced v Drawings
HellsBells


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Capital Introduced v Drawings
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Hi All

A sole trader takes out drawings weekly. Occasionally, pays in his own money to cover large payments coming out. Would you put his own money to Capital Introduced or would you credit Drawings? I dont think(?) it makes much difference to the year-end capital figure but is one method right or wrong? Would one method be correct and preferable (to Accountant, Bank, HMRC etc) over the other?

Thanks

Hel



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Eilef


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Hi Hel,

The correct way of doing it is to Cr the Capital Account with the amounts paid in and all drawings should be Dr to the Drawings nominal Account.



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Eilef Loken MIAB

 
HellsBells


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Thank you very much Eilef.

Wasn't sure if I would be overstating the amount of capital in the business if someone were to examine the accounts during the year.

Much appreciated.

Hel



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Eilef


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There would be various entries to balance this out mind.

Remember every item has a double entry....

So for example if Mr X paid £150 gas bill out of his own pocket I would do it this way.

Cr Capital £150
Dr Cash £150

Cr Cash £150
Dr Gas £150

This way you would show that he had paid £150 into the business and then £150 has gone back out.



-- Edited by Eilef on Sunday 19th of April 2015 11:49:34 PM

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Eilef Loken MIAB

 
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