Capital introduced and sole trader

How is capital introduced dealt with in a profit and loss account

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Hi all,

I am a sole trader and I have a simple business model - re-selling other people's products to my own customers.

I have a business bank account. From time to time I have put money into the business account from my personal bank account.

I also pay myself "drawings"/wages from the business account.

For the purpose of working out my profit or loss for my self assessment, can anyone tell me how the capital introduced is dealt with?

Do I simply deduct it from the drawings/wages I pay myself?

Thanks

N

Replies (11)

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Scalloway Castle
By scalloway
18th Aug 2018 23:45

Capital introduced and drawings have no effect on the Profit and Loss Account. As a sole trader you and the business are the same. Capital introduced and drawings are merely you moving your own money around. There is no tax effect.

Capital introduced and drawings are entered in the Balance Sheet.

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By Tim Vane
19th Aug 2018 00:10

That gurgling noise you can hear above you is the sound of being well out of your depth. The other thing you can hear is the sound of laughter. Not sure if that’s me or the tax man. Probably both.

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RLI
By lionofludesch
19th Aug 2018 10:28

Out of your depth a bit here, nige.

What else don't you know ?©

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Replying to lionofludesch:
paddle steamer
By DJKL
19th Aug 2018 21:07

Hands up anyone who has never received a set of draft accounts from a sole trader (or partnership) client with drawings through the P & L?

It is a rite of passage as is the conversation with clients concerning their belief that it is impossible that the tax bill you have just advised them is correct, it cannot possibly be correct, as the bank account only has £500 left in it.

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Replying to DJKL:
RLI
By lionofludesch
20th Aug 2018 09:26

DJKL wrote:

Hands up anyone who has never received a set of draft accounts from a sole trader (or partnership) client with drawings through the P & L?

Me. I've never received a set of draft accounts from a sole trader.

I think myself lucky to get books.

Thanks (1)
Replying to lionofludesch:
paddle steamer
By DJKL
20th Aug 2018 12:53

We had a few in the 1980s/1990s, they had dumped the old manual cash book etc and decided to use a computer- usually without talking to us.

The results were always very interesting as I am sure all those who embrace the current plethora of accounts software still get to see on a regular basis.

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Replying to DJKL:
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By andy.partridge
20th Aug 2018 12:19

That . . . and I've had a few 'marketing fees' included by sole-traders who do their own marketing.

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By SXGuy
19th Aug 2018 21:41

You didnt give anything to the business, you didn't take any drawings from it either.

Your a sole trader not a company. Perhaps do some research. But whatever you do, please don't file anything until you have.

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Replying to SXGuy:
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By 356B
20th Aug 2018 12:14

Ah! I see you're using text English. Most of us use proper English as it is much clearer.

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By Manchester_man
19th Aug 2018 21:46

Oh it reminds me of the old days when the majority of small business clients were sold traders (before Gordon brown introduced the 10k 0% starting rate band for ltd companies); trying to explain to clients that their 'drawings' were not 'wages' and were nothing to do with the P&L account.

To the op, I agree with the above comments - if you're getting this wrong, it's almost certain you're getting the less basic things wrong also.

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By Mrbailey
20th Aug 2018 18:24

Capital introduced is in essence the total of assets you yourself bring into the business . These assets can comprise petty cash, cash lodged to a bank, and motor vehicle and working apparatus. The aforementioned are debits in your account and the total of these debits is your credit balance of ' capital introduced '
Your income is sales less all expenses. This is your profit. Assessable for self assessment. Do not deduct items which are private expenses.

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