Sole Trader

lgarside

I am doing the bookkeeping for my friend's hairdressing salon. He is a sole trader and I simply enter the receipts and payments into a Simplex D ledger book from his bank statements.

The question is, the book is divided into weeks and I ensure the receipts are written down in the correct week as the money was received (even though it credits the bank the following week). Do I need to accrue expenses in the same way or does it not matter. Can I just write the expenses in the week as they occur and make sure I have accrued at the year end?

Do I even need to accrue the income in this way or just record it all on a cash basis? I have read some web pages and the answers seem to be mixed with regard to sole traders and cash accounting/ accrual basis.

deanshepherd

Firstly, you need to ditch the horrendous Simplex D book and use a spreadsheet!

The accounts need to be prepared on an accruals basis but I wouldn't try and cram that into the Simplex D. Just make the necessary adjustments at year end.

lmiddleham

I'd have thought you could record the income in the accounts on the day it was received regardless of when it enters the bank.
At the end of the year the money would either be in the bank or in cash in hand which are both essentially the same thing.
If it was a sole trader I'd just class any money not going into the bank as Drawings.

That's what I was planning to do with the books for my girlfriends business. Am I making a big mistake here?

lgarside

sole trader

Thanks, can you send me a copy of a spreadsheet template?

With regard to the income a lot of this is taken on card and this doesn't appear on the bank statement for a few days.

Therefore if you are recording the data on a weekly basis, I'm having to look at the following week and then back date the receipts. i.e money taken on cards for 10/03/10 won't appear on the statement until say 15/03/10, if the week is cut off on the Saturday then I'm having to include this receipt for week commencing 07/03/10, does this make sense or am I making far too much work for myself?

I also have the same issue with cheques, sometimes these aren't banked for 2 weeks later so I have to back date these when they are entered into the book.

This is how the person I took over from was doing it. I think her accountant told her to make sure the receipts were being entered into the right week, but it didn't matter for expenses.

lmiddleham

Date the receipt when the service is carried out - as soon as he's done the work he can class it as turnover.

The bank statement will show a difference to the bank account in your book - this difference will be uncleared receipts (or outstanding lodgments as it was called when I did AAT foundation) but it's the balance per your accounts that you'd show in the financial statements as opposed to the bank statement balanace.

PM me your email address and I'll send the template. If you're good with excel formulae you'll be able to figure out how to add balance sheet and P&L accounts from what I've done, otherwise you may struggle.

lgarside

sole trader

That's easier said than done as there are no receipts. The sole trader has about 5 people a day it's a really small business where cheques are banked in one batch the following week and the rest is on cards. All income and expenditure is taken from the bank statements, there are no other records, as you can see I therefore need to look at the entries on the bank and then include them in the week it was received.

Could I just add all receipts/expenditure each month and just do it monthly or does it have to be shown daily?

lmiddleham

Surely he could keep receipts by way of copies of credit card slips and photocopy cheques?
I got your PM, it's a pretty complex template I've got and it's all built into one I'm afraid so it's probably not what you need.
Hopefully someone else has got something more suitable

Monsoon

PM me your email and I'll send you a simple spreadsheet.