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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If the entire bank account is not being analysed and posted then do what you like.
Only the P & L matters
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.
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?
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.
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.
Agreed entirely. I think the OP is referring to Payments on Account (self assessment payments to HMRC).
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