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Sage Opening Balances

I have a new client who is now registered as self employed and at the date of going self employed his bank is  minus £9.02.  I have always thought that the entry in Sage is DR/CR Bank and DR/CR Profit and Loss (as told by my tutor and old company accountant) but I stumbled upon a similar post recently and the answers were to post the opening bank balance to the suspense account. 

I just want to check which one is correct?

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14th Mar 2012 15:38

Another suggestion I have seen is to just enter a general ledger entry to get the correct balance?

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14th Mar 2012 16:15

What! These postings are a wind up arn't they?

Please tell me you are not serious, the client is just starting and you are about to make a posting to retained profit? 

Why don't you ask the company accountant? Oh I forgot that's you!

 

Jokes getting a little stale now.

 

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14th Mar 2012 16:30

I am only doing what my tutor and a chartered accountant told me to do.  I admit, I always thought it was strange but just did as I was told!

I suppose then based on your EXTREMELY helpful answer the best and correct way is to make the posting to the suspense account and then journal the entry out of the suspense to the correct nominal?

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14th Mar 2012 16:37

But also, say he had £100 on

But also, say he had £100 on 01/01/2012 in the bank and this is the day he went self employed.  What nominal do I key this £100 to reflect it in the bank.  Would it be capital introduced perhaps?

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14th Mar 2012 17:04

Well yes!

This is  a wind up isn't it?

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14th Mar 2012 17:13

NO!

I have genuinely been told my tutor and chartered accountant I used to work with that this was the correct way.  I honestly did not think it was right but never questioned it.  Now I am in business myself and the first time I have to enter opening balances (other times I have had a Sage backup given to me) for a newly self employed person I need to know if I am right to have questioned the P&L posting all along and what the correct way is as I have seen so many different answers to this questions.

If I had not asked for help I would have DR Bank CR Capital Introduced

Please give me a straight answer.

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14th Mar 2012 18:35

Opening Balances

If you use the Opening Balance button on each nominal account to enter opening balances then Sage does post the opposite entry to the suspense account.  Once the full nominal opening balances have been entered, the suspense account reverts to zero - I suspect that is where the mention of the suspense account comes from.

I'm not an accountant :) so I'll leave where the opening balances should go to those who are but, to use a VERY simple example:

Business starts with £100 in the bank as capital introduced from the owner - to enter these opening balances, you have 2 choices:

1. Use the opening balance button on the record and Sage will post the the nominal and the opposite entry goes to suspense so, having entered your two opening balances, you end up with 4 journals on the audit trail and a zero balance on suspense.

2. Alternatively, simply DR bank and CR capital introduced and you have 2 journals with nothing going to suspense at all.

John

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14th Mar 2012 18:59

Thanks for your serious answer! As said before I would have used bank and capital introduced but just wanted to double check based on what I had been told by others and research. Some people on this forum really need to chill out!

Thanks once again!

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Minus balance on the bank account

DR Drawings/Capital Withdrawals

CR Bank

:)

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15th Mar 2012 09:31

You would have been right

If you had just gone Cr Bank Dr Capital Intro

Are any other assets brought in?

 

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15th Mar 2012 13:52

No other assets.  He simply

No other assets.  He simply had minus £9.02 in his bank on the day he went self-employed so this was all I needed to know - thanks!

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15th Mar 2012 14:02

Is this his only bank account?

Does he intend to get a dedicated business account?

ie do you really want this account to be part of the business?

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15th Mar 2012 14:07

You are correct re: bank / capital introduced but lets be honest here.  If you need to confirm this are you really going to take on various clients, prepare their accounts and then give tax advice.  Sorry for being blunt but best to consider this now than when HMRC turn up for an inspection.

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15th Mar 2012 14:13

If you read my earlier posts the query came about because I had been told by a chartered accountant that posting to the p&l was the correct way.  I never thought this was correct and have never done this myself, so now the time has come when I need to do it I wanted to check.  I don't think I was completely clear in my original post!  I new in deep down that the capital intro and bank were the correct entries but just wanted to confirm.

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Business bank account?

If your client has just decided to go self employed and has an overdrawn balance on the bank account I'm guessing that this is a personal bank account that will now be used for a mixture of business/personal use?

If it is, its going to involve lots of postings to the capital account, so just post the £9 there.

In the grand scheme of things its not material  so I really wouldn't get too hung up about it. As you get more experience you'll work out the best way for yourself to deal with these sorts of issues whether it involves postings to the suspense account or the capital account for now and then sort them out at a later date.

Good luck.

 

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15th Mar 2012 14:09

He doesn't intend to get a dedicated business account BUT he does have more than 1 account linked to his main current account so I have suggested he have all his income and "business expenses" through one of the others and just set up a monthly DD to his main account to cover personal DDs and personal expenses!  

Right now though I will treat anything going through this account that is not business as drawings.  It isn't as complicated as it sounds to be honest as for Jan-Feb he only has about 20 transactions!!

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