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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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.
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.
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.
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.
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.
That . . . and I've had a few 'marketing fees' included by sole-traders who do their own marketing.
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.
Ah! I see you're using text English. Most of us use proper English as it is much clearer.
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.
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.