How do I treat capital introduced and salary taken?

[keirms]

OK OK, so I've finally got around to doing a proper p&l to track the businesses money... bad I know but at least I'm doing it now.

In theory, the profit should match the bank statements (income minus expenses) minus the capital introduced into the company and the cash taken out as salary.

As a sole trader how do I treat these two items? I know that the capital should be on the balance sheet but I don't really want to do one. Very confused and no accounts book makes sense. Do they ever?!

Please help if you can...!

Thanks,

Keir

 

[jholden]

Keir,

The answers are:

CAPITAL INTRODUCED
Debit Bank account/cash account for Capital Introduced
Credit Capital Introduced in the Capital section on the Balance Sheet

SALARY TAKEN - as a sole trader you do not take a salary but you do take drawings, therefore:
Debit drawing on the Balance Sheet
Credit bank account/cash account

If you are not doing a blance sheet non of the above really matter!!

What I would say to you is find a good local accountant to do this for you, you never know he may save you more in tax than he costs!!

To help smaller clients like yourself I now give all new clients some free accountnig software, I know what you're thinking, but this software is very easy to use, even i can use it, and ultimately it keeps fees down!!

Jason
www.holdenassociates.co.uk