Apologies if this is pretty basic, but I can’t seem to find the answer:
If I pay myself as a sole trader - i.e just withdraw money from the business bank account, should that be tagged as an expense or an overhead?
Also, which code should I tag it with?
It’s a really straightforward account with not very much going through, so I just want the simplest way to show money going to me in under the right heading so P&L gives me the right tax prediction etc.
it’s a drawing
Use “transfer between accounts” when you tag the amount in your business bank account within quickfile and choose the drawing account “Proprietors Drawings Account, private use”
Thanks for this, I did look at transferring to Proprietors Drawings Account, but wasn’t sure what to do with it once in there - when I did a test, my running balance was out by the amount transferred - i.e if I pay myself 5k, my balance in the current account shows +5k above what it actually is… what do with that Proprietors Drawings Account to make everything balance?
You take the money out of your business current bank account and transfer it to the drawings account every time you “pay” yourself - You just mark it as a drawing and in real life you pay your private rent, buy a pair of socks for yourself, pay your weekly food shopping and so on. You spent the money privately or place it in a private saving account, but in your bookkeeping software it is marked as drawing and shows up in a virtual bank (drawing) account.
So, it looks like you entered that amount as a money in transaction rather a money out transaction.
Have a look at these links which should be helpful in your case:
Thanks, I’ll try prop accounts again - the main thing that was confusing me was running balance of my main account not reflecting payment to myself.
Eg - if 10k goes in the business bank account and I draw 5k to my personal account - my business bank account shows 5k left, but in quickfile it still shows as 10k, even after I send it to the proprietors account. Am I doing something wrong? The incorrect running balance really throws me off!
Yes you’re probably doing something wrong.
If your account shows 10k and you physically pay out 5k whether that be by bank transfer, withdrawal from a wall etc, you’d have a transaction for 5k wouldn’t you?
So your balance would then show as 5k.
If the balance doesn’t change where are you getting your transactions from?
If your manually tagging invoices and receipts then you need to create that money out transaction in your bank account and then tag it as drawings.
BTW for future reference. You don’t get tax relief on paying yourself money. Your a sole trader not a company or employee
Ok, problem solved! The system had glitched and wasn’t deducting the drawings from the balance. I had to delete every line in the proprietors drawing account, log out and back in again then retag/assign them all again (quite easy with bulk actions). It now deducts the drawings and my running balance is how it should be.
Annoying but at least it was just a system glitch, it all makes sense again and panic over that I had totally misunderstood some fundamentals!
Thanks for your help, rhc & Paul.
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