Hi ,
Can someone please confirm the correct procedure for the following:
If you are a sole trader, you have a business and personal bank account.
You would reconcile the business bank account but if you had business transactions going through your personal account without reconciling it, how would you insert the expenses
would it be DR Expense CR accounts payable ? if so then how you would you remove the accounts payable balance would you DR accounts payable and CR drawings or cash or any other account?
Many thanks
Replies (1)
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You would Dr expenses Cr proprietor's capital account.
You wouldn't Cr accounts payable because there are none.
You wouldn't Cr cash because the business wouldn't have paid any cash, so your cash balance would be mis-stated.
You could Cr drawings, but I would suggest keeping drawings for withdrawals only and showing introductions separately.