DRAWINGS....

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
Am about to start my first set of books, going to prepare them for the accountant up to the trial balace.
My client is sole trader who does not take a salary but just pays for food shopping etc out of there bank account. they do not have a seperate bank account. would i class them as drawings?

Also they have a seperate savings account which they sometimes use - how would i incorporate this?

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:DRAWINGS....

    loz9791,

    You are correct in saying that the food shopping expenditure etc. should go to drawings, as it is the private expenditure of the owner(s).

    Why not suggest that they set up a personal bank account (it doesn't cost anything) but will keep there personal and business affairs seperate. I know from experience that it is not always clear what items are business and what are personal if a person only operates from one bank account.

    Does the savings account have anything to do with the business trade. For sole traders we do not usually incorporate savings accounts into the business records unless they have something to do with the trade.

    However, if you wish to do so, then the double entry would be:

    DR - Bank
    CR - Capital introduced

    with the amount of money in the savings account on the day it is incorporated into the business' records.


    Tom
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:DRAWINGS....

    It is quite common for sole traders to only have one bank account - is it a business or personal one? If it is a business account after 1 - 2 years they will have to pay bank charges, but if it a personal account they will (probably) have free banking :D

    Claudia

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