Expenses paid by sole trader

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
I'm just curious - where a sole trader has paid for small items out of his/her personal account and never re-imbursed him/herself from the business account how do you show it in the accounts & on the tax return? I think it seems daft classing a few stamps & a stapler as capital introduced so usually just deduct it from the drawings account, but this client i'm working on now hasn't taken any drawings as he's still living off his redundancy pay-out until the business becomes more profitable.
:?: how would you treat it?

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    Why not have a mythical petty cash tin? It can be overdrawn for now, and can be netted off against drawings in the future. If you really want you could even show it is a creditor, though I think that is probably going slightly over the top...

    Claudia
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    I agreed wtih Claudia. I tend to use a dummy bank account if I'm using a software package and record "bank" payments where the sole trader has bought something, and "bank" receipts where he/she has not banked cash received from a customer.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    Would you not use a capital account?

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    mmm going to have to sleep on this one i think! just like i thought, there's different ways of showing it but i still can't decide what's best for this situation... i'm having a very indecisive day, hopefully tomorrow will be better :lol:

    dean would you use the capital account?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    Yes definetly. If you were to show a 3rd party the accounts then it wouldn't be 'cash' or a 'bank a/c'. It would be a liability of the 'business' to repay its owner, after all the business has had the benefit an expense in its books that it hasn't 'yet' paid for.

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    thanks very much, most appreciated :)
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    Your welcome :)

    Regards

    Dean
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Expenses paid by sole trader

    I would always net against drawings, as you suggested.

    If there are no drawings then I would post them to capital introduced - that is your capital account.

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