Double Entry with no Bank

Raging Pineapples

Hi all,

My mind's gone blank after not having to do double entry for months.

My wife's just set up a self employed cleaning business and I'm doing her bookkeeping. She doesn't operate a business bank account, so for now I've handled income in this way:


CR Sales -> £50
DR Drawings -> £50

It's on the principle that money would normally go Sales -> Bank -> Drawings anyway, and since there is no bank, she's kinda pocketted the money instantly.

However, what would be the entries for her weekly National Insurance Class IIs?

I'm imagining it would go this way:

CR NICs Owed -> £2.40
DR NIC Expense -> £2.40

(4 weeks later, she pays as below)

DR NICs Owed -> £9.60
CR Capital -> £9.60

That would reflect that by drawing out 100% of the income she's leaving a gap of £2.40 a week in the business which as owner she later has to fill by reinjecting capital back into it. Am I reasoning this out properly?

The only issue that crossed my mind is whether I should CR Capital or Drawings, since in a sense it's drawn funds she's reimbursing rather than a completely new capital injection.

It's not a huge issue but it'll bother me if I don't get it sorted out, lol.

Chris

truecockney

Would setting up a "cash-in-hand" account on the balance sheet be a simplier solution? At the end of the month, you can transfer a balancing amount through "Drawings" and calculating NI payable on that.

You then wouldn't have to worry about the dilemma of entering the payment of NI through "Drawings" or "Capital".

andrewtdk

I may be wrong but surely there is no need to enter class 2 NI into the accounts as this is a personal expense? I presume your wife is paying this personally as there is no business bank account so if this is the case you would just been entering it into the accounts with one journal and then producing another journal to disallow it from the accounts anyway?

Bluewednesday

andrewtdk wrote: »

I may be wrong but surely there is no need to enter class 2 NI into the accounts as this is a personal expense? I presume your wife is paying this personally as there is no business bank account so if this is the case you would just been entering it into the accounts with one journal and then producing another journal to disallow it from the accounts anyway?

I agree

Raging Pineapples

andrewtdk wrote: »

I may be wrong but surely there is no need to enter class 2 NI into the accounts as this is a personal expense? I presume your wife is paying this personally as there is no business bank account so if this is the case you would just been entering it into the accounts with one journal and then producing another journal to disallow it from the accounts anyway?

Good point there! Lol, but it's handy having an account for it even if it gets removed later - that way all the Monies Owed are in the same accounting system.

burg

I agree that it's rather irrelevant as it is not a business expense.

The simplest method would be to use a 'cash in hand' account.

Monsoon

andrewtdk wrote: »

I may be wrong but surely there is no need to enter class 2 NI into the accounts as this is a personal expense? I presume your wife is paying this personally as there is no business bank account so if this is the case you would just been entering it into the accounts with one journal and then producing another journal to disallow it from the accounts anyway?

I agree too!

lorraine

I agree too, that class 2 ni is a personal expense, so doesn't need to be in the accounts.

Monsoon

lorraine wrote: »

I agree too, that class 2 ni is a personal expense, so doesn't need to be in the accounts.

"But I'm self employed and I only pay it because I'm self employed so it's a business expense, and I'll put it in every year, despite you advising me not to every year" ~ Mr Client



Had one client code it to "Professional fees"....!