Finally, I think I’ve got the right question for the answer I need…
How do I deal with the retained profits at the end of the year for the sole trader?
These have obviously been removed from the company as taxable earnings but are showing in quickfile as retained.
How will I begin a new year with this still stored. I would like the accounts to reflect reality.
Profit from P&L goes into Capital and reserves section of balance sheet.
If you look at balance sheet it would show
Capital a/c
P&L b/f
P&L for the year
less : Drawings
and at bottom total of balance sheet footing
Once every thing is finalised, go to Year End Journals and click on updates, it will move balances automatically to correct position for next year
I’m going to give the year end another shot but so far, and I’ve tried twice…the retained profit is not clearing out to the drawings account. It is all staying the same into the next year.
It wont clear out to drawing a/c automatically. Ideally it should be clubbed to capital a/c along with this year’s drawings, so you should get new balance on capital a/c next year
I think that may be the problem. I was advised to used a proprietors drawings account for capital. Which I did.
Is this what’s causing the problem?
Do you happen to know how to achieve this in quickfile?
to give you an example say
YE 31/03/2014
Capital b/f 100
Profit for the year 200
drawings (50)
once you run year end journals, your new year capital a/c should be 250 as at 01/01/2014
Ok. I understand the calculation sample you’ve given.
But, what I’m actually getting at year end in quick file,
Is retained profit figure of example Ye 05/04/2013 £500
Opening Ye14 balances include retained profit £500
There are no retained profits in real life as this is self employed earnings.
I cannot find any setting that will change this for the following year.I cannot find any way of tagging. Journals don’t seem to have this option.
The accounts for expenses are clear, but once I put in 13-14 account info, its going to show an even higher retained profit which just does not exist.
I need to know how to correct this in quickbooks.
At present the only way I can see is to open a new set of accounts with start balances but that seems stupid.
does your bank reconciles for 2012-13?
Yes, everything is put in manually,and only business stuff is put through.
I have reverted everything to how it was inputted which may be the issue…
At the ye 13 I get
Assets 9375
Bank (which should be drawings) (8679)
Retained profit 696
I should expect a dr to bank/cr drawings to fix the bank error. Everything paid out is entered manually from the personal account or receipts.
I do not know how to remove the retained profit at the end of the year for the start of the next. Sole traders do not reserve profits, due to the profit being the income.
I expected to transfer it from bank to the drawings account but that doesn’t remove it when I run year end either.
(I cannot ask an accountant, my partner will not permit it, but I do need to protect the family from a mess later so this is vital help I need.)
Do you think this may be due to using the drawing acc and not the capital account which appears to be nonexistant?
If I may contribute here - don’t forget that in double-entry speak, to increase a capital account, you need a Credit entry. So, in QF terms, if you introduced £500 into the business, you would do a MONEY IN transaction in your current account. Next choose tag ==> something else not on the list ==> on the post to accounts dropdown choose proprietor or partner drawings ==> give it some description and save. The double entry here is Dr bank (increase), Cr prop/partner drawings (increase).
When the year-end process runs, it will clear the p&l balances to 0 and move the retained profit figure to the Capital account (by making a Credit entry). If you have had drawings for personal use, the net figure will show as a Debit entry in the capital account (reducing it). The brought down figure from the capital account is the closing capital amount or, put another way, the new balance sheet figure to start the new financial year.
Hope that clarifies things a bit for you.
Also profit generated this year are only taxable in current year any profits carried forward next year are not taxed again
Only if you exceed the personal allowances amount set by hmrc; £9440 at the moment, then going to £10,000 in the 2014/15 tax year.
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