Hello, I’m a sole trader working from home and I currently claim 75% of my broadband costs as business and 25% as personal.
Payments for my broadband come out of my business account and appear in the QF live feed. I mark these payments as a “purchase” and link the payment on the live feed (and upload/attach the invoice).
What is the simplest way to account for the 25% personal use? If I change the amount on the “purchase” manually it obviously then doesn’t match up with the bank transactions or invoice, and I’m conscious that when MTD for ITSA these things might need to match up.
If you make the QuickFile purchase be just for the 75% business portion, the simplest way to deal with it would be to mark that purchase as paid from the proprietor drawings account and then tag the money out from the business current account as a transfer to the same drawings account. This would have the overall effect of showing 75% as a business expense and the other 25% as drawings (money taken out of the business for personal use, in this case used to pay the personal element of your broadband bill).
If you are not vat registered then the alternative would be just to input the bill in full but then journal 25% of the value from the P&L code to drawings (or partially credit-note one of the purchases and refund it to the drawings account) at the end of each quarter.
@ian_roberts thanks so much for answering. I’m not VAT registered so the second option sounds good. When you say journal 25% of the value from P&L code to drawings, is the P&L code 3200? If so I’m guessing it would look something along these lines at the end of each quarter (see screenshots).
However, on my profit loss page it doesn’t seem to make any difference to the figures when I do this.
I wondered if instead of using 3200 I should use 7503 Broadband Interent & Fax? If I do that it does change the figures on the profit and loss page but seems to increase the profit figure by £50 rather than reduce it (which I was expecting by adding the 25% personal use).
The latter is the correct nominal code (7503), but you’ve got the credit and debit the wrong way round. The original purchases put a £200 debit on 7503, so your journal wants to put a £50 credit on 7503 and the matching £50 debit on 1202.
Something that catches a lot of people out when they’re starting out with this sort of thing is that the nominal code view of a bank account is backwards from how you’re normally used to thinking about them with the statements that your bank sends you - in QuickFile a “money in” transaction on a bank account is actually a debit line in the nominal ledger, and “money out” is a credit line. This seems odd until you realise that the statement that the bank sends you shows you from the perspective of the bank, but QuickFile shows the bank from your perspective. Money you deposit at the bank is an asset (debit) for you, but a liability (credit) from the point of view of the bank because they have to give it back to you if you ask for it.
The way I try and think about it is that a “credit” entry is where the money came from and “debit” is where it went to. This is straightforward for things like bank transfers - credit on the account you transferred from, debit on the account the money went into. It requires a little bit more mental gymnastics with the control accounts, but I still find the model helps, at least as a mnemonic that assets and expenses are debits, and therefore liabilities and sales are credits. Anything where it’s not so obvious, I use the to/from rule for the lines where it does make sense and then just do whatever is required to make things balance!
