Year end banking as a sole trader

[andrewgill]

The end of the tax year is next week and I have a question about banking

As a sole trader, I have purchases from the Proprietor’s Drawings Account and I’ve received income in GBP and EUR

The balances aren’t correct because I’ve transferred net profit from each paid invoice into my personal current account

Does the year end process ‘zero’ those, do I do it via a journal or do I just leave as is?

Thanks in advance

andrew

[ian_roberts]

The year end process doesn’t affect any bank account balances (or anything else on the balance sheet) - it only zeroes the P&L codes and transfers the net profit or loss to the “capital and reserves” section.

If you’ve been taking money out of your TransferWise account into your personal bank account then that would be treated simply as a bank transfer from the TransferWise account to your drawings account - for each withdrawal create a “money in” transaction manually on the drawings account for the amount of GBP you received and tag it as a transfer from the TransferWise (entering the relevant EUR amount if it’s a cross currency transfer). The TransferWise fees will need to be accounted for separately.

Before running the year end it would be a good idea to record the currency loss or gain on the EUR account - this is an option on any foreign currency account which revalues the current EUR balance based on today’s exchange rate and moves the GBP difference to the “currency charges” nominal.

[andrewgill]

Hi Ian

Thanks so much for the message

I did the money in / out and now my GBP and EUR bank balances in QF match the account but my Proprietors Drawings Account shows a positive balance of GBP 15K

If i try to journal and adjust that to zero, my shows as an adjustment and affects my net profit

Do you have any ideas on how to fix the drawings balance or do I just not worry about this balance?

thanks in advance

andrew

[Paul_Courtier]

If you’ve drawn money for yourself then this would be classed as drawings and so the nominal would be correct.

At the end of the year when you do the year end process the drawings nominal will be cleared down.

[ian_roberts]

@andrewgill

Do you have any ideas on how to fix the drawings balance or do I just not worry about this balance?

QuickFile treats drawings as a bank account to make it easier to log purchases paid for out of personal funds (you just mark them paid from the drawings bank account). What I personally do at year end is manually enter a transaction on the drawings bank account to return the balance to zero and tag that via “something else not on the list” to the drawings nominal in the “capital and reserves” section - I don’t know off hand which exact number that is in a sole trader account, I’m a partnership and I have separate drawing accounts in the 12xx range and capital accounts in the 31xx range for each partner.