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POA - accounting treatment.

Delete from banking or drawings? Sorry if very basic.

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Hi

 

Apologies if this is basic, but the penny is not dropping on this one.

Payments on account, how are they treated for sole traders, please? I have been posting them to ‘drawings’ as it is the tax on previous profits but where I am getting confused is whether I should be including them at all or should I delete them from the banking as I do with personal expenses? It is a personal account, not business so more items are personal than business, mostly shopping and personal utility bills.

I mainly use drawings for personal expenses or to apportion a business expense with sole traders if it is a business bank account, but this is personal.

Now everything is digital; I am questioning everything.

 

I really appreciate any help you can provide.

Replies (18)

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By Paul Crowley
26th Mar 2021 13:38

If the entire bank account is not being analysed and posted then do what you like.
Only the P & L matters

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Replying to Paul Crowley:
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By New To Accountancy
26th Mar 2021 13:41

That's great, thank you very much for your help Paul

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By SXGuy
26th Mar 2021 14:51

BTW. You shouldn't be deleting anything. If it's personal then it is a drawing.

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Replying to SXGuy:
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By New To Accountancy
26th Mar 2021 15:17

Oh no, I have because it's a joint personal account and his partner and her income and expenditure is there too and although the personal expenditure is sometimes obvious, I would only want to post his personal expenditure to drawings not hers too and there's so many that they're unsure of who's is who's so I thought it was best to analyse only business transactions. Is this the wrong decision? Might have to import them again?

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Replying to New To Accountancy:
Danny Kent
By Viciuno
26th Mar 2021 17:19

If you are recording drawings then it sounds like you are preparing the balance sheet as well. In that case you will need to re-import as nothing will balance, well it will but your closing bank balance will be rubbish.

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Replying to New To Accountancy:
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By SXGuy
26th Mar 2021 17:23

.

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Replying to New To Accountancy:
By turchyna582
27th Mar 2021 18:11

Just advise him to operate a separate account for HIS business, and not put anything through that account (income or expenditure) that is not exclusively for HIS business activity!
Less time wasting and expense for everyone!
Just a thought - surely the very fact that he is using the 'joint' personal account for HIS business activity; would that not expose him and his partner to all their personal affairs being examined in an HMRC enquiry?

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Replying to turchyna582:
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By New To Accountancy
27th Mar 2021 21:32

Hi,
Yes, I agree with everything you say. The problem I have is, he's not my client, so I don't want to make suggestions in case his accountant takes offence. I asked if I could do the bookkeeping, so the experience is of value to me, and I do not want the accountant to think I am stepping on his toes.
With regards to exposure if investigated, yes, absolutely but again, I'm leaving that to his accountant.

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By tom123
26th Mar 2021 15:34

The thought of using a joint account for personal and business is horrific.

You need to be pushing the client to a bank account just for business.

Payment On Account - I would tend that to mean a payment to a supplier before receipt of the invoice.

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Replying to tom123:
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By New To Accountancy
26th Mar 2021 16:02

Yes it has been horrific but I deliberately put this trader on an accounting license for experience, ready for 2023. Mainly to get out of the mindset of just Ltd companies accounting treatment. In future, even if pushed, will over £10ks get a business account? As I'm unsure, that's why I have started now so I'm ready.
With regards to POA,yes ordinarily I would tend it to mean a payment to a supplier. Perhaps that's why I couldn't find the answer in any books or online research as I was referring to the Jan and July payments on account, nothing else was.

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Replying to New To Accountancy:
Danny Kent
By Viciuno
26th Mar 2021 17:27

Not too sure what an "accounting license" is in relation to a bank account which is what I suspect Tom is referring to.

Banks will open business bank accounts with Nil turnover, not too sure how easy it is with a traditional high street bank but the likes of Starling and Tide certainly do no problem.

You should be getting all your clients to open business accounts.

Edit - I'm hoping this isn't a client actually and it is just your own business/your employer. In which case you should open a bank account/encourage your boss to open one.

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Replying to Viciuno:
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By New To Accountancy
26th Mar 2021 21:20

Hi, 'accounting license' is just the term Sage use for the bookkeeping, it's nothing to do with the bank. Sorry for any confusion.
This is a client who already has an accountant, I've asked if I can do the bookkeeping - purely for the experience of a sole trader on an 'accounting license' ready for 2023, as I've only ever prepared year-end accounts for sole traders, once a year, never through digital bookkeeping. The accountant has said he doesn't need the balance sheet, just the profit and loss, but I'm going to import again anyway just to get it how it should be.
Thank you for your help.

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Replying to New To Accountancy:
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By SXGuy
26th Mar 2021 17:24

Hmrc are not suppliers.

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Replying to SXGuy:
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By New To Accountancy
26th Mar 2021 21:09

Hi, yes I know. I was referring to 'POA' usually means payments to suppliers, not POA for Jan/ July in SA.

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Replying to tom123:
By turchyna582
27th Mar 2021 18:13

Agreed entirely. I think the OP is referring to Payments on Account (self assessment payments to HMRC).

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Replying to turchyna582:
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By New To Accountancy
27th Mar 2021 21:34

Yes, that's right I am.

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By Paul Crowley
26th Mar 2021 21:23

Well done you for making a start
I have a lot of clients with mixed use bank accounts
I only put a profit and loss together and balance up on drawings
Balance sheet pointless

I would prefer business only bank accounts

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Replying to Paul Crowley:
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By New To Accountancy
26th Mar 2021 22:18

Thanks very much Paul.

That's good to know, thank you.

Yes, I have learned not to bother with personal, especially joint accounts, but that's why I took this on I suppose, to learn.

Thank you for your help today, much appreciated.

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