Accounting for using my own money to start business

Discussion in 'Accounts & Finance' started by tangerine27, Oct 16, 2020.

  1. tangerine27

    tangerine27 UKBF Newcomer Free Member

    2 0
    Hi all,

    I did do a search but couldn't find anything particularly relevant so I hope you can help!

    I recently set up as a sole trader, but before I set up a business bank account (yes I know I didn't need one but wanted one for neatness) I had already made a few purchases from my personal bank account and my credit card (of which these purchases are now paid off in full with my own money). Everything is now paid off, and I have received my first payment from a client into my business account so I will be transferring over these directs debits etc to that account.

    I have yet to take a payment from my business as I haven't yet earned enough money. How do I go about doing the accounting for this? Do I need to take back the money I paid for these things and mark that as something in particular? Then begin to take "salary" payments?

    I've never done any accounting before and any help would be appreciated!!
     
    Posted: Oct 16, 2020 By: tangerine27 Member since: Oct 16, 2020
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    24,866 3,030
    Your profit as a sole trader is your income. There isn't a salary as such.

    There isn't a difference between you and the business. Deal with the payment for stuff as expense.
     
    Posted: Oct 16, 2020 By: Mr D Member since: Feb 12, 2017
    #2
  3. tangerine27

    tangerine27 UKBF Newcomer Free Member

    2 0
    Oh yes I realise that - I just wondered whether there was something I ought to be doing accounting wise. For example my credit card payments are showing as liabilities in my accounting software, although I have paid them back in full - do I need to show this as a transaction?
     
    Posted: Oct 16, 2020 By: tangerine27 Member since: Oct 16, 2020
    #3
  4. Scalloway

    Scalloway UKBF Legend Free Member

    16,477 3,486
    Any money you pay from sources other than the business bank account is Capital Introduced. You can add this a bank account in your software so when you pay for something the expense is added to the correct expense code and the sum due to you appears as a liability. If you refund yourself the method to use is a Bank Transfer.
     
    Posted: Oct 16, 2020 By: Scalloway Member since: Jun 6, 2010
    #4
  5. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    13,257 2,486
    The payments you made from your own funds will be shown as capital introduced. Exactly how this is recorded depends on your software. Generally you'll use a journal entry so will debit the costs and credit capital introduced.

    If you decide to repay yourself (and you don't have to) the payments to you will be drawings.
     
    Posted: Oct 16, 2020 By: MyAccountantOnline Member since: Sep 24, 2008
    #5
  6. Spur Support Services

    Spur Support Services UKBF Contributor Free Member

    68 13
    If you have paid the expenses yourself, then you have introduced funds into the business.

    In a software sense, have a look for an "owners distributions/drawings/introductions" accounts.
    Your credit card liability has been paid by you, so you have "introduced" those funds into the business.
    You need to post a transaction to recognise your payment of the credit card (DR credit card, CR Owner Funds Introduced.

    It is great that you are already recording all your business expenses in your software.
    Don't forget to upload the expense receipts to the software if it has that functionality.

    TIP: If you are using accounting software which includes bank feeds, see if you can set up automatic feeds for your business credit card. (perhaps not such a great idea if it is really your personal card with the odd business expense :D )

    I hope this helps.
     
    Posted: Oct 18, 2020 at 5:09 PM By: Spur Support Services Member since: Aug 21, 2020
    #6