Hello,
Please could you help regarding my year end accounts. At my year end I have paid back some money to myself which I loaned the business. How do I account for this so it clearly shows on my P&L and balance sheet?
Kind regards
Pete
Hi Pete,
To account for the money would depend on how you recorded the transactions when you loaned the money to the business.
A sole trader might record a loan to the business as capital introduced (Code 3300), or maybe as Sundry Creditors (Code 2101).
A Limited Company might use the Sundry Creditors (2101) or the Director’s Loan account (1201).
The money you loaned to the business won’t appear on your P&L, it will appear as a liability or capital in your balance sheet, depending on where you recorded it when you loaned the money.
Say you loaned your business ÂŁ500, your balance sheet would show the bank balance with an extra ÂŁ500, and either a liability account code, or the capital introduced account code with an extra ÂŁ500.
Say the business then repaid you ÂŁ250, then your balance sheet would show your bank balance with ÂŁ250 less, and your liability or capital with ÂŁ250 less.
So it depends on which account you recorded the loan to the business into, as to how you record the loan repayment back out to you.
Hope this helps a bit !
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Thank you for your reply it makes sense recording the loan to code 3300 (Capital Introduced) however how do I record this? do I complete a journal? or setup another bank account (to act as my personal account which I paid suppliers from). When I first setup my business I paid my suppliers direct from my personal account, when I enter my suppliers invoices Quick File only give me options to pay from accounts on my dashboard so where & how do I enter this code (3300)?
Thank you.
Pete
How did you record these purchases in QuickFile? The normal way to record business purchases paid with personal funds would be to log the purchases as being paid from the “proprietor drawings” bank account, which leaves that account showing as overdrawn.
If you wanted to shift that liability to the 3300 capital account then you simply create a “money in” transaction for the appropriate amount in the drawings bank account and tag that to 3300 using the “something not on the list” option. This will clear the overdrawn balance on drawings and balance it with an entry in the capital section.
Hi, I recorded the purchases coming from the “proprietors drawings account” bank account. So say the business has made £500.00 profit at my year end & I repaid back £250.00 how would I record this? a journal? or bank transfer between my business current account and the proprietors drawings account? I did a transfer from my business current account to the proprietors drawings account but I’m not confident this is correct as the £250.00 still appears on the P&L.
Thank you.
Pete
The latter. This doesn’t affect your P&L, it’s purely a movement of funds around your balance sheet, so I’m not sure what you mean by “the £250 still appears on the P&L”. The original purchases that you made with your own funds will contribute to P&L but the repayment from your current account shouldn’t.
So if I repaid myself ÂŁ250.00 would this come off the profit? Also I did a complete stock take at year end how do I record this? What journal codes do I use?
Thank you
Pete
No. Your profit is purely the business income minus expenses regardless of whether those expenses were paid out of the business bank account or out of your personal funds (and whether or not you later took money out of the business account to “repay yourself” - as a sole trader you don’t lend money to the business, you are the business).
Assuming you’ve been recording your purchases of stock items during the year as “general purchases” in the normal way, then the way to account for stock at the year end is to journal the value of stock in hand on the last day of the accounting year:
- debit “stock” (in my QuickFile this is 1001 - a balance sheet code under assets & liabilities)
- credit “closing stock” (5201 - a P&L code)
This makes your cost of sales for the year equal to your general purchases during the year minus what you have left at the end.
For the following year you’d do the same thing but this time you need to account for the opening stock from the previous year as well:
- debit “opening stock” for the previous year’s closing stock value
- credit “stock” for the same
- debit “stock” for this year’s closing value
- credit “closing stock” for the same
This makes the cost of sales for the year equal to what you started with, plus what you bought, minus what you had left at the end.
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Thank you for the confirmation I understand. However I have more questions. When I purchase the postage should I record this as general purchases or postage & packaging? I have recorded it as postage & packaging (7501) but on the P&L it’s under expenses & I think it should show under cost of sales. Is this correct? also I’ve recorded stationery for the business under stationery (code 7504) should this also go under general purchases? One last question (sorry) how do I record written off stock?
Thank you for all your help.
Pete
I would be very grateful if someone could help with my questions please.
Postage can go in either, it depends on what the postage is for really. If you want to record it as cost of sales, because it is the cost of delivering either goods for stock or goods sold, then by all means include it in cost of sales. You can add a code in this range if it helps.
Stationery would generally be an office cost.
Written off stock is accounted for at the year-end when you enter your stocktake journal. When you enter the journal above based on your closing stock, it automatically accounts for any stock you have disposed of as obsolete, as it shouldn’t be left in stock when you do your year-end stocktake.
That’s great. Thank you for your help.
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