I am planning to start up a sole trader, selling paintings and drawings online. I have not yet registered with HMRC, or set up my Quick File account. I am completely new to running a business, but over the last five years !i have purchased various artworks which I would like to now use as initial sales stock to start my business. I initially I purchased these with my personal account, but subsequently I have been using an account that I set up for the purpose of being a business only account. I have receipts for most items apart from some I have bought from car boot sales. I
My questions are
1 How do I account for these items being added to my inventory of sales stock.
2 How can I balance my accounts against my bank statements if these items were purchased a long time prior to the business startup and the financial year.
3 Do I have to show that I have re-embursed my personal account the cost of the items I have added to my business.
3 What do I do about those items I do not have receipts for.
I am considering not registering for VAT as most of my purchases were made from non VAT registered sellersI , so the issue of claiming back VAT is not my main concern , however I would be interested to know if this is possible with the items I have paid VAT on if I do decide to register.
I would appreciate any advice/ help. I plenty of information about adding items as assets, but not adding sales stock purchased prior to business startup. The value of the stock is also more likely to have increased so this would be counter to the depreciation factors applied to assets.
Typically you would just go and lodge a purchase invoice set to the date you acquired the paintings and post them to a balance sheet code like “Stock”. You can pay for these items from the Proprietor Drawings Account.
Regarding the differentiation between your personal and business accounts, there really isn’t any. As a sole trader your business and personal accounts are one and the same. Accounting as a sole trader involves entering only those transactions that relate to your business (irrespective of the bank account) and leaving out everything else.
There’s a useful guide here that will explain a few of the concepts
Sole Trader Bookkeeping - The Basics
Just to add I’m not an accountant, so it’s always worth seeking professional advice. There may be capital gains involved here so if the amounts are significant it’s highly advisable to seek a professional opinion.
Thanks for the help. The items are not of great value (mostly within the £30 - £60. range. maximum total no more than £700 …) so I hope there would not be capital gains issues.
Am I right in saying that I would need to do a separate purchase invoice for each picture brought into stock because they were all purchased at different times. Also with regard to the drawings payment; am I right in saying that once I have set my personal account as the drawings account within QuickFile, all I need to do is record the date of the drawing as the date of the purchase/Invoice and reconcile this with my bank statements of that period. In other words I do not have to re-fund my drawings account the purchase cost.
Sorry to be so green on all this.
Not necessarily, you could post a single purchase invoice 1 day before the accounting year starts, covering a lump sum amount for all paintings acquired.
There’s no need to balance any personal accounts, you just need log the previously mentioned purchase invoice as paid from the proprietor drawings account (set to the same date as the invoice) and there’s nothing to refund.
This is just a reply to say thanks ! The helps you have given has got me past a stumbling block and will now allow me to progress with my plans. Just thought you should know your help is greatly appreciated
Not a problem, glad to help!