Expenses

Sandy Dog

I am using Sage Instant and can’t find any information in the help section. Perhaps you can help?

I want to add a business expense paid from a private bank account i.e. one outside of the business’s entity. The expense would reduce the profit and so the capital also, but as it is not coming out of the business bank, the business bank balance would not reduce and so the assets would not balance with the capital.

The way I have overcome this is by:
setting up the private business account (from which the expenses are paid) with a nil opening balance;
recorded only the business expenses that go out of that account; and
at the month end recorded an introduction of capital to the business in the amount that reduces the private bank balance to zero.

Questions:
1. Is there any problem with doing this?
2. Is there a better method?
3. Can I use this same approach to record e.g. business mileage by a sole trader using his own private car that i.e. one that is not included in the business's entity?

Monsoon

That's just fine.

I usually set up a "private bank account" in bookkeeping software to pay things personally, and then clear an "overdrawn" balance with capital/drawings.

It's also fine with mileage too. I'd usually just straight journal it (Dr motor expense cr drawings) unless there is a VAT claim involved, in which case a Bank Payment is easier.

PGM

Is that better than them submiting an expenses sheet, and treating them like a supplier?

Monsoon

Not better, just different.

Sandy Dog

Just to say thank you for your advice, it was very re-assuring.