Ok so I am a newly registered Soletrader (not VAT registered) and I recently set up my business bank account. However the card never came through in time and I had to make some stock purchases using my personal account. I do not use an accounting software and was hoping to just keep a simple weekly spreadsheet with an 'in' and an 'out'.
Now I was just wondering how do I record the purchases I made through my personal account on the business records? And also how do I record personal funds that I put into the business account to buy other stock?
Its as if you loaned the money to the business and then the business made the purchases.
For purchases made before start of trading they are recognised as though purchased on the first day of trading.
You are a sole trader so the account that you would use is the owners capital account (usually referred to as just a capital account).
The double entries would be
Cr Capital
Dr Petty Cash
Cr Petty Cash
Dr Expense
That ties it all up nicely even though the reality is more likely to simply be
Cr Capital
Dr Expense
That misses out the pseudo reality of what should have happened with the transaction but the result is the same.
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.
I think this is where I'm getting confused with the double entries. I'm getting confused on how to write it down on paper. Would it be possible to give me a rough idea of headings within the spreadsheet?
Sounds as though you are looking for a straight income and expenditure log for your own use to give you some small control of finances before handing everything over to the accountant?
Few questions first.
What sort of business is it? (service industry / retail / manufacturing / etc.)
What industry sector (Just being nosey)
What sort of estimated annual turnover are we talking about? (just trying to get some idea of size)
Do you already have an accountant for your business? If so, do they have income and expenditure software that they give out to their clients for free? (I could give you / point you to some free cashbook software but its no good if there's noone to sit with you to walk you through how to use it properly).
Also, which part of the country are you in (in case you do need someone to help you get started, always better face to face)
Talk in a bit,
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.
I assume you are creating a cashbook? So, you will have columns on the left which say how the item was paid... cash, bank, PRIVATE - then you will have columns going across the sheet which analyse the expense..
You just need a private column in your "how paid" section to log thing you paid from your own account.
General headings are
Date
Reference number (which you write on the purchase invoice before filing - literaly 1, 2, 3.... it just something that help the accountant get back to a piece of paper when reviewing the sheet
Supplier Name
Then you have your "How paid" columns
Bank
Cash
Company credit card
Private
Then you have your columns which analyse what's been paid - the usual suspects
Materials/Stock (if you sell products)
Subcontractors (if you use people to do the work that is sold on to clients)
Phone
Web and website costs
Computer and software (your accountant should be checking this, to see if there are any high value items that need to go on the balance sheet)
Office repairs and general maintenance
Postage
Stationery
Bank charges
Advertising
Rent
Cleaning
Accountant
Sundry (always have sundry at the end, and have a note column at the side to explain it)
(Basically these columns can be anything, tailored to your business. If you are not sure, tell us what you do, and we can help.)
Your "how paid" column totals, added together, should equal your expense analysis totals, added together.
If you are a sole trader, you might be putting your car through the business.. prefer to have columns for fuel, tax and insurance, and repairs.
You will also need a "drawings" expense column, for money you take for yourself, or private items paid by the business.
If you withdraw cash from the bank.. you would show the amount drawn in the BANK "how paid" column, and then you would have an expense column called "Cash Withdrawn"
Any items purchased with this cash, would be recorded as normal, and shown in the CASH "how paid" column.
If you withdraw from an ATM that charges - you would show, say, £151.99 in the BANK "how paid" column, and this would analyse across as £150 "cash withdrawn" and £1.99 bank charges
Your accountant will know what to with that, in order to balance the bank etc.
I've recently downloaded VT Cashbook to try and help with all this. Do you know how to input these business expenses I used my personal funds for? Also would I need the chart of accounts to be on Self Employment or Sole Trader?
Also if I transferred personal funds into the business account (not income from the services I sell) then how would I record this in VT aswell?
I wold go sole trader as it's more future proofed for your business (self employed is a simplified cut down version of sole trader).
for capital introduced :
Cr Capital Introduced Dr Bank
For the expenses then
Cr Bank Dr Expense
HTH,
Shaun.
p.s. Unless the money was not paid into the bank in which case see my first post above.
-- Edited by Shamus on Tuesday 13th of October 2015 01:51:33 PM
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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.
Quick question: If someone pays me in cash, would I input this into VT Cashbook as income into the Petty Cash, and then transfer it over when I put it into the business bank account?
Unfortunately I am not currently in the position to be able to do that. I would like to be able to keep the records for myself and then seek help when filling in my self assessment. Also could you please clarify what you mean when you say allocate it to my invoice? Would I be better off just inputting it as an income straight into my current account?
Quick question: If someone pays me in cash, would I input this into VT Cashbook as income into the Petty Cash, and then transfer it over when I put it into the business bank account?
Yes.
the double entries (as indicated by Joanne) would, if a sales invoice exists for the customer, be :
Cr : Customer Account
Dr : Petty Cash
(which follows the creation of the sales invoice which would have been Cr Revenue / Dr Customer Account)
If there was no invoice (such as a cash sale in a shop)
Cr : Revenue
Dr : Petty Cash
When you bank the cash you would journal :
Cr : Petty Cash
Dr : Bank
When you do seek professional help ensure that you give it plenty of time rather than wait until the last moment. To file by the end of January ensure that you have employed the services of an Accountant by mid November. If this is your firs year your first self assessment needs to be January 2017 for the period ended April 2016.
By not seeking professional help before setting up you may inadvertantly have caused yourself issues over matter such as double taxation if your basis periods are out of step with the accounting period.
Also you may be making mistakes over what you can and cannot expense which the accountant will correct at the perod end but things may come as a surprise so ensure that you engage them before the period end rather than when they are unable to correct mistakes and misconceptions in period.
A good accountant will try to ensure that you keep more money by using them than you would have done without them (including avoided penalties, interest and surcharges). Getting one on board early may be one of the best moves that you make for your business as they will ensure that you are doing things correctly rather than you facing the cost of them needing to redo at the period end what you have been doing through the year.
Where abouts in the country are you and what sort of business is this? Just wondering as at some stag I feel that you will probably be seekig to use the paid services of one of us.
kindest 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.
I am located in Birmingham and my business is mobile nail treatments. I will be seeking help early to complete my self assessment, but at the moment I am not financial able enough to afford a book keeper right now. In the future maybe.
Could I instead use the transfer option, to move the money from Petty Cash to Current Account? Or would it be better to make a new payment crediting the petty cash and putting that into the current account? Also by revenue, would I just use Income - Sales?
both Joanne and myself have in fact already answered your question above which is part of the worry in that you are looking to take on that side yourself where you are not yet able to get your head around the double entry. Can I also assume that you do not know what to expense, what is a cost of sales and what you should capitalise?
Not trying to be negative or anything but as with most of the accountants and bookkeepers on here qwe have seen the disasters that happen when people have done things themselves and ended up costing themselves more than had they engaged a professional from the get go.
Take an example. When did you tell HMRC that your business started? Do you realise that if you mess up your start date and make a first year profit then you can end up being taxed twice on those profits?
Do you realise that you (probably) need to pay class 2 NI contributions as well as class 4?
I've given those away free but remember that everyone here is running businesses the same as yourself so will be looking to charge for the knowledge bases that they have acquired at great cost to themselves both in money and invested time. The site is actually meant for bookkeepers to help each other rather than a free advice line to end users of our services.
However, as you're here. Looking at your business type where you will be paid in cash without a pre printed invoice most of the time. Ensure that you ALWAYS give receipts to clients. Carry with you at all times a numbered duplicates book (available from WH Smiths, any office supplies shop or from somewhere like Amazon). Also record every journey including distance to and from the clients in a mileage log.
The accountant will use the duplicates slip in your receipts books to determin the amount of money that you have received as income.
To record this in VT (this is repeating from above)
Cr : Revenue
Dr : Petty Cash
When you bank the cash you would journal :
Cr : Petty Cash
Dr : Bank
If you keep the money rather than banking it you journal
Dr : Drawings
Cr : Petty Cash
I think thats really gone about as far as we can go with this as the thread is just repeating the same things.
You need to get into the mindset that to run a successful business you need to employ the right professionals to help you. So, from the get go you need to be factoring those overheads into your pricing structure.
Hope that the above makes sense and that your business is a great success,
Kindest 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.
I am all for business owner understanding the numbers and what goes into them, after all they are crucial to the business, plus I also understand that when you set up and run a business you have to ensure you control your costs properly and do not necessarily have the funds behind you to do things in a certain way. Although as Shaun says - it can cost you more by doing it yourself, because you can do it wrong, as so very many of all our clients have done because they havent involved professionals at the very start.
You say you cannot afford a bookkeeper BUT you are expecting bookkeepers and Accountants on here to answer your queries for free. People who have trained hard for years to learn their trade and many who also cannot afford to give their time away. How would that work if everyone did that? Or indeed if I approached your business for free nail treatments and then come back the next day for change of nail varnish colour and the next day for a pedicure.
Shaun perhaps says it more diplomatically than I do, and perhaps I am feeling crosser about this as I have just had a client try to take the proverbial (although he didnt get away with it!), so sorry if this sounds blunt, but I am only saying what I know a few people on here already think.
In an effort to assist though - I would ask - have you heard of Blue Orchid? They are an agency who can assist in teaching you enough of the basics to get you through the first crucial month eg running a basic cashbook etc. They are government backed so will provide their hel for free and whilst its not as good as it used to be due to cutbacks, its worth a phone call to them. They will also provide information of Health and Safety (flammable stuff)/ necessary insurances/how to deal with HMRC etc etc. I wish you well with your business.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
