Accounts for sole trader using personal bank accounts

Accounts for sole trader using personal bank...

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Helping a friend (sole trader) do his year end accounts. He has not made much profit and therefore doesn't want to spend much on his accounts. I have a fairly good idea of his liabilities at the year end, but have found the financial transactions re. he and his wife's bank accounts very complicated to work through, there are a lot of inter account transfers and its hard to ascertain what is trading income.

He has only made a profit of about 5k, is it enough to say that he received X amount, his expenses were X amount and therefore the drawings at the end of that will be whatever else has been paid out. He has also used a number of credit cards for 6 month periods. I am getting really bogged down and cannot see the woods for the trees. Help!
jm

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By listerramjet
21st Oct 2005 16:37

cover your back
you should ensure that you have a clearly defined contract for this, set out in a letter of engagement, and demonstrate that the client has accepted it.

it sounds like a candidate for an investigation and an assessment!

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By User deleted
21st Oct 2005 14:17

sole trader accounts
Hi,

For the next year the business gets much bigger, I got involved at that point and it is all on an accounting package now. It was just going back over the previous year which I foolishly agreed to do quite cheaply that has got me into a spot of bother. Main probs were additional funds raised on own home to buy other properties and fund a renovation project (cannot see where exactly it has gone and am worried about expensing all the interest on the increase and also income from auction trading that has been banked with no breakdowns are details, which appears to be in with family stuff. I want to do a decent job but not spend the rest of my life on it.

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By User deleted
21st Oct 2005 13:48

This does happen....
At least with a client you can charge them more for this sort of hassle - more difficult with friends, though.

I would (and this is only a personal view) probably attempt the following:

(1) No matter what the hassle, make sure the income figure is correct.
(2) Go through and on a spreadsheet pick out and allocate as many expenses as you can confidently state and prove.
(3) Use the above 2 steps to construct the accounts. You can if you want use a balancing figure for drawings on the balance sheet, but if it's a small trader I'd probably skip the balance sheet altogether and just go for an income and expenditure statement.

Hope everything goes well...

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By User deleted
21st Oct 2005 13:58

sole trader accounts
Hi,

Thanks so much for that, was expecting someone to say that I was being really dumb, but it all just seem to be getting so complicated for what is not really a gread deal of profit. The income and expenditure account is a really good idea. Thanks

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By ACDWebb
21st Oct 2005 14:06

As a forward note
get him to open a new account that only business transactions go through to make life a bit easier next year.

Not only will it help you, but shoud make life easier in the event of an enquiry into the return and HMRC do expect it.

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