Hi there,
I’m currently stuck on what I should log something under as, (expense) in Quickfile.
I run a business, the business’ current account is used to pay for another (different) business’ mortgage too.
I’m not too sure on what expense I should log this as under the company, would someone mind to explain to me? Thank you.
All input is extremely appreciated!
Are you a Ltd company or sole trader?
The shop from which the account is being used to a sole trader whereas it’s paying for a ltd.
To clarify, the money is coming away from the sole trader to pay for the mortgage of the ltd company.
Thank you!
OK so for you the sole trader unless I’m missing a key peice of information, isn’t a business expense. It should be tagged as proprietor drawings. Unless your treating the money as a loan. In which case it would go on the balance sheet as such.
The Ltd company would record it depending on the above.
I’m not too sure, the money is directly coming out of the sole trader account. I’m not too worried as of right now about what it would appear on the balance sheet as just the sole trader account.
In that case its tagged as proprietor drawings. As I said before. It isn’t an expense of the sole trader business.
Ok, I really appreciate the help! Thank you so much, I hope you have a great day
Hey Paul, sorry for asking so much but would it still be counted as properieter drawings if it were to be a direct debit (automatically coming out monthly)
Payment method is irrelevant. It’s proprietor drawings regardless.
Ok, thank you Lurch. I really appreciate your help! I hope you have a great day!
Anything where you’re taking money out of the business for something that is not a business expense is by definition drawings - whether that is moving funds to your personal bank account, using business funds to pay for a personal purchase, paying HMRC for your personal Self Assessment bill, etc.
Oh okay, that cleared the air for me, thank you Ian. I really appreciate your help alot
If someone is a sole trader and they extract money from the business to pay for income tax,
What would this be?
Again, drawings. Your self assessment income tax and class 2/4 NI is a personal cost, not a deductible business expense. The amount you owe is calculated (at least in part) from your business profits but the payment itself isn’t a cost to the business - it might include other things like income from a second business, share dividends, etc. etc.
Ok, thank you!
I really appreciate your patience and how you’re choosing to help me out
@alexander I’ve noticed a few questions you’ve posted here and in another well known accounting forum and by the content of the questions I’d really advise you see an accountant because I’d be pretty certain you will make some key accounting mistakes that will end up costing you more than paid professional advice.