Posting purchases to Drawings

Case is where a sole trader is using a personal bank account/petty cash for both personal and business use. The proverbial shoebox of receipts and only halve the bank statements.
I note the remarks about not entering personal expenses in the first place but I’m not clear how a bank rec on the system would can be tied back to the bank statement. It is not always possible to differentiate between personnel and business at the time of data entry. My own view is guilty until proved innocent.
I would prefer to book all his receipts/bills no matter whether bank or cash against the drawings account and then journal back those expenses deemed allowable for tax purposes to the P&L supporting the journal with a sub-analysis of the drawings account at year end. There is also an issue with motor expenses.
I would again to prefer to book all motor expenses to a sub-account of drawings. Say drawings- motor and then journal back a charge to P&L for the AMA allowed for the vehicle for that year. That way we can see at a glance whether actual costs incurred for the vehicle are being covered by AMA.
As things stand, would have sub-analysis all P&L accounts for tax purposes

[quote=“Adrian_Maudsley, post:1, topic:150”]
I would prefer to book all his receipts/bills no matter whether bank or cash against the drawings account and then journal back those expenses deemed allowable for tax purposes to the P&L supporting the journal with a sub-analysis of the drawings account at year end.
[/quote]

That would be unnecessarily complicated and will provide a poor audit trail for HMRC, should they open an enquiry into your tax affairs. Remember as a Sole Trader business there is no legal separation between you and your business, therefore your sales less your business expenses becomes your trading profit and your trading profit is counted as your personal income.

With regards to including your personal account, you may want to upload your personal bank statements to use the tagging feature, although as a Sole Trader, you do not need to complete a Bank Reconciliation, simply enter/tag all sales and expenses for the business and ignore/delete any personal items. Any untagged items will sit in the suspense account and the balance will need to be journaled out to a balance sheet nominal code at the end of the year or create a new dedicated nominal code on the balance sheet to journal to.

You can ‘Set up a New Bank Account’ for motor expenses and then tag all items from your personal account as a transfer to this new account, you can go create a new purchase for the AMAP’s (Approved Mileage Allowance Payments) and log the payment as paid from the new bank account. Therefore, only the AMAP will now be entered onto the P&L Account.

Thankyou for your prompt and comprehensive reply.

There’s always more than one way to skin a cat isn’t there when it comes to sole traders and their casual approach to banking :smile:

More possibilities have opened up in the light of your comments and better familiarity with the software. I take your point about the drawings account and HMRC audit trails. I’m developing a different approach which stays within the software.

Very interesting suggestion on the AMAP. I used a cheque holding account recently as advised in the knowledge bank and I can see how that would work. One of the objectives would be transparency to the owner in the ongoing difference between AMAP or actual basis for vehicle costs.It’s his first year. I can see how a sub-bank account to gather up all the debits on actual costs would achieve that. Balance cleared to the drawings at the end of the year. debit balances b/d are the owners indulgence. A credit balance could be regarded as further capital introduced.

I have to say I am seriously impressed with the software. Tried Sage line 50 and Quickbooks online as a potential book-keeping solution for this sole trader and was very dis-enchanted with both. Quickfile seems to me to have been constructed on the assumption of incomplete records, i.e. real life, and is , in some places, more intuitive.