I have now setup my invoice template and everything ready to go. After a little more play. I have come to the conclusion that Quickfile will really help me in my business venture.
I have setup a journal for my initial personal investment. Debit Proprietor Account and Credit Current Account. I then used that money to ‘purchase stock’. So processed a purchase using the current account money.
Now, I will of course being introducing stock into my business from word go as I will be selling physical goods.
How do I account for this as I dont have a previous year?
Do I journal, Debit Stock and Credit Opening Stock?
Firstly credits and debits are reversed from what you see on a normal bank statement, so your initial investment journal should credit the proprietor drawings account and debit the current account. Alternatively, instead of a journal, you can just use bank tagging, with a “money in” transaction on the current account tagged as a transfer from proprietor drawings.
As for stock, the opening and closing stock nominal codes are just devices for the end of year process, if you’re starting from scratch then you don’t have any opening stock from the previous year end. Introducing stock to sell is no different from introducing capital. I’d do it by creating a purchase in the “general purchases” category for the value of the stock you’re introducing and pay for that purchase from the proprietor drawings account. Subsequent stock you buy once the business is up and running will similarly be “general purchases” but now paid for from the bank account rather than from drawings.
At the end of your first year you journal the value of your stock then in hand from credit “closing stock” to debit “stock” to get the right cost of sales for the year, then the same amount back the other way from credit “stock” to debit “opening stock” the next year.
Usual disclaimer - I am not an accountant, consult a real one if you are unsure.
Thank you, that makes complete sense. My initial stock is placed in as a ‘general purchase’ so I have done that correctly. Regarding the Proprietor Drawings, I followed the steps on the Knowledge-base so guessing I did that correctly. I clicked the account, Proprietor, ‘Money Out’ placing me in a minus. This figure went to my current account and then I purchased my initial stock from the current account putting me back to £0.
I could have done this a lot simpler by just purchasing the stock directly from the proprietor account.
Will this make a difference?