Sole Trader - Taking money out to feed the family

Question asked by Thomas W. William-Powlett 11 years ago

So I am VERY new to all this. I am a very small scale sole trader, with no company or VAT registration.

I just imported all my bank transactions and that was fine.

But a couple of times I took money out so we can eat, and transferred it to my personal bank account. I put it down as salary. Now, I don't really want to reconcile my personal account as well, but how do I classify money that I need to pay my household bills (the reason I am doing the sole trader in the first place). I think if it is "salary" then it affects my "profit" and hence my tax liability will be wrong.

Or am I completely mistaken?

Thanks.

Accounting Accounting
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3 Replies

I looked further in to this. I think that it should be "Drawings" - is that correct? It is not an obvious description for the uninitiated...

11 years ago

Hello Thomas,

You can use a Directors Loan Account to do this. Here is the guide on how to create it.
http://www.clearbooks.co.uk/support/guides/bank-accounts-bank-accounts/account-for-directors-loan/

When you have any expenses that you need to claim back, put it as money out on the Directors Loan Account which means the business owes you that money.

Drawings is used when you are taking money from the business' profits. Anything you have for lunch etc will be used in the normal account codes.

Please can you look at the link above and then look on the left hand side for other guides that will help you.

Regards
Vanish

11 years ago

Thanks. I think I am actually taking from the profits here, so Drawings is what I should use.

Thank you for the link.

11 years ago

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