Clarifying Sole Trader using Sage Instant Accounts

[Bearoon]

Hi all,

I've had a read of some of the other relevant threads but still somewhat confused and would appreciate clarification.

I had been making payments from my business account to my personal account making myself a Supplier on Sage and using the nominal code 7000 - Gross Wages for the transactions.

My accountant pointed out to me that using this code shows in my profit/loss account and can't be considered an expense and I'm clear about how the taxman sees profit.

So, within Instant Accounts there appears to be no nominal code for drawings and I am assuming I will need to create one in the 3000 range. Correct?

Does it matter what the nominal code is?

Finally, am I simply adding a level of administration marking 'drawings' i.e. Do I still need to be on Sage as a Supplier or can I simply transfer the money from my business account?

I sense its all blindingly obvious but I just can't see the whole picture!

many thanks

 

[Jenni384]

Your accountant is right.

Just make a code called "drawings" in the 3000 range and make all your payments to yourself go to that code. You don't need a supplier account.

 

[weebly_one]

Another tip is to set up an account in the bank Account range - something like 1260 - and call it by your name or something memorable. It kind of acts as a temporary loan account between you and the business and is good for keeping track of transactions posted.

You can then if you have paid suppliers personally post payments direct to 'your' bank account, and also if you receieve money in cash do reciepts for invoice, then at the end of each month/quarter do a reciept or payment from your bank account to the balance to the drawings account you have created to bring the balance of the account to zero.

I hope that makes sense!

 

[Bearoon]

Huge thanks to you both - all makes sense now.

Now I have a follow-up query: what's the best way to sort out my previous posted entries in Sage for both Wages and expenses. Delete and repost? Edit?

Sometimes I just can't see the wood for the trees!

 

[Jenni384]

Go to your Nominal Ledger, look at the total you've posted for 'Wages'. It should be a debit balance.

Go to journals, CR Wages £x, DR Drawings [be it 3000 or a bank account number like 1260] the same amount.

You've just moved the whole lot to the new account in one go.

Hope that makes sense.

 

[weebly_one]

I would be tempted to delete and then go again with the new method in order to cement the process in your head.

You could edit the nominal code from wages to the drawings account, but if you have done invoices and payments already Sage will not let you do this.

An alternative method would be to do a journal entry which 'moves' the ammounts out of wages and into drawings which would be in Nominal - Journals

CR Wages code 700x £xx
DR Drawings 3xxx £xx

You can do one journal for the full ammount - or if you want monthly accounts to look better do separate ones for each payment you have made.

 

[weebly_one]

Go to your Nominal Ledger, look at the total you've posted for 'Wages'. It should be a debit balance.

Go to journals, CR Wages £x, DR Drawings [be it 3000 or a bank account number like 1260] the same amount.

You've just moved the whole lot to the new account in one go.

Hope that makes sense.

Great minds think alike!

 

[Bearoon]

Great suggestion!

Before I do so (I don't know why I have such a fear dealing with Sage Instant Accounts - perhaps that I want to do it right and not cause more work later) can I clarify what code to use: 3000 and 3010 come under Share Capital 'sub-branch' (off Total Capital and Reserves).
3100 Reserves, 3101 Undistributed reserves, 3200 Profit and Loss Account - come under 'Reserves' (also off Total Capital and Reserves).

Running the Wizard on demo data - I have to create a name and specify which type of nominal code it is (sales, purchases, capital & reserves) say I chose 'Capital & Reserves' then on the next page it asks me what category (shares, reserves or [un-named category])

Hand-holding and advice greatly appreciated!

Nearly there...

 

[weebly_one]

The Sole Trader I book-keep for uses a code next to the shares area in the 3000 - 3010 range.

It is in the chart of accounts under Share Capital - but that is a title that can be changed easily.

 

[Bearoon]

Thanks all. Worked it out (with trepidation) but looks like I've done it.

Edited the current COA range for share capital to start at 3011 (from 3000)
Added a new range 3000-3010 as Drawings
Then used the New>Nominal Record Wizard to define 3001 as Drawings under Capital & Reserves (as it said 3000 was in use).
Then used the Journal to credit the amount in 7000 Gross Wages and debit the same amount in 3001.

It looks right when I ran my P&L?!

 

[Jenni384]

If you go into the Chart of Accounts and hit "check" it will tell you if there are any errors. Looks like you've edited the COA ok though, and your journal makes sense, so I think it should be fine

 

[OakRow]

This has answered exactly the problem I was experiencing, but please could you tell me what happens to the balance in 3000 at year end?

Many thanks

 

[David Griffiths]

This has answered exactly the problem I was experiencing, but please could you tell me what happens to the balance in 3000 at year end?

Many thanks

Nothing, basically, The balance carries forward to the new year and you need to journal it out to the Capital Account - also in the 3000 range.

 

[whiteleyl]

I have a problem similar to this I have been recording drawings to code 3050 but when I run the year end it brings the balance forward to the new year. It sounds like I need to do a journal to clear this code down every year is that correct?

This code has not been cleared down for the last 7 years so there is a substantial amount of money in code 3050 which I dont think is correct. Should I do the journal between my 3050 code and 3000 capital code to clear this?

Also if I do need to do the journal should I do the whole 7 years total as one journal entry or should I do each year seperately so I would have to do 7 journal entries I didnt know if this would be the better option as then I can identify each year drawings.

Thank you in advance for any help

 

[Scalloway]

It sounds like I need to do a journal to clear this code down every year is that correct?

Not neceessarily. As a sole trader your drawings are just you moving your own money about.

should I do each year seperately so I would have to do 7 journal entries

Only if you want to identfy them separately.

To move the balance in the Drawings account Debit your Capital Account and Credit Drawings.

 

[whiteleyl]

Not neceessarily. As a sole trader your drawings are just you moving your own money about.

Only if you want to identfy them separately.

To move the balance in the Drawings account Debit your Capital Account and Credit Drawings.

Thank you much appreciated