We are trading as a partnership with 2 partners. I have set up drawings accounts for each of us and transferring our drawings to those using the transfer between accounts when tagging the items.
To ensure these amounts don’t stay showing as Partnership assets I believe I need to then withdraw the amounts from the drawings account but when I go to tag the withdrawal as Salary or Partner Drawings I can only select the payment type as Employee Salary (PAYE) which isn’t correct as it is Partner Drawings.
What am I doing wrong?
Currently showing the partnership Balance is about £28K higher than it should be when looking at the Balance Sheet.
Hi
Not sure this is an accounting question - think it is a support question as the payment type options I am giving are not the same as documentation I have seen elsewhere in the knowledgebase.
You need to create some extra nominals in the 3000 range (capital and reserves) and periodically move the drawings “bank account” balances over there. The way I do it is to create three nominal accounts per partner under the capital section for that partner’s capital introduced, share of profits, and drawings taken (mirroring the three that are there by default in the sole trader case).
As part of my year end I move the balance from each partner’s 12xx drawings account to the corresponding 3xxx “drawings taken”, and I adjust the YE journal to split the profit between the partners’ “share of profit” accounts rather than putting it all in 3101. Each partner’s “share” of the business at any given time is the sum of their three nominals - capital invested plus share of profit minus drawings taken out.
Thanks for that Ian - seems a bit different to the knowledgebase articles I found but your process sort of makes sense.
Main query is why go through the 12xx drawings account rather than straight to the 3xxx nominal accounts (btw I’m not an accountant or book keeper hence the questions)
During the year, it’s often easier to manage what the business ‘owes’ the proprietor, and vise-versa, by using the bank account. This would be in the same way you would do it as a Director with a limited company.
If you could let me know what knowledgebase article you found, I’ll certainly ask this to be reviewed to avoid confusion going forward.
I’m not an accountant either, I kind of worked out my method by trial and error based on what QuickFile sets up by default for sole traders and on wanting what I see in QuickFile to match the accounts my accountant gives us at year end.
Thanks for the help. looking at how it shows in QF it certainly shows right and makes sense. Currently we don’t have an accountant but will be looking for someone locally shortly.