Hi,
Can anyone help me please? I am finalising a set of accounts and am wanting to add the end of year taxation liability to the balance sheet.
How would this be journaled in please?
Mark
Sole trader self assessment is a personal liability, not a business one, so normally it wouldn’t show in your books at all (apart from as drawings at the point when you make the settlement payment, if that comes out of the business bank account).
I suppose if you wanted to make provision for this payment before it actually happened so you’ve got a figure on the balance sheet telling you how much it’s going to be, then you could create a separate liability nominal and journal the liability amount to credit that new nominal and debit drawings. Then when you pay the bill tag that transaction to the new nominal instead of to drawings. As long as you make the journal in the year when you will pay the tax bill rather than the year whose profit figure went into the calculation then it’ll have the same effect overall - there will be nothing related to SA in either year end balance sheet, and the amount of the year A tax bill will be subsumed into drawings for year B.
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