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• # 70911
• Fri 13 May 2011 06:43 AM

Morning all,

A new client handed over his brown paper bag of assorted papers yesterday and the first thing I notice is that he has been using his three personal accounts to pay suppliers and bank takings.  I have explained the importance of the entity concept etc and he has vowed to use a single 'business' account in the future.  In the meantime, how do I record/reconcile the transactions already made?

Look forward to hearing from you.

Phil

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• # 70912
• Fri 13 May 2011 07:54 AM

Is he a sole trader or a limited company?

If he is a sole trader then there is no necessity to prepare a balance sheet (although I would say that it is preferable that you do so).  I would suggest that for expenses / suppliers he has paid that you debit the expense / supplier account and debit the Drawings account as what he has spent will be offset against what he draws from the business.

If he is a limited company, debit the expense / supplier account and debit the Director's Current account as what he has spent will be offset against what he draws from the business.

Edited at 14 May 2011 11:53 AM GMT

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• # 70934
• Fri 13 May 2011 01:53 PM

Not much to add to Mad Liz, but, if a sole-trader, may be worth checking if any of those three accounts are actually set up as a business account in his personal name - if he hasn't a trading name.  If there are then recn those.  Also if done in previous years then continue.

Depending on the software I tend to post personal bank transactions to cash and then journal the difference to dwgs at the eoy. (If no cash recn)

Regards

Andrew

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• # 70942
• Fri 13 May 2011 03:52 PM

Thanks for those great replies, looks like this could be a good one!

Phil

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• # 71035
• Tue 17 May 2011 08:07 AM

Mad Liz said:

“Is he a sole trader or a limited company?

If he is a sole trader then there is no necessity to prepare a balance sheet (although I would say that it is preferable that you do so).  I would suggest that for expenses / suppliers he has paid that you debit the expense / supplier account and credit the Drawings account as what he has spent will be offset against what he draws from the business.

If he is a limited company, debit the expense / supplier account and credit the Director's Current account as what he has spent will be offset against what he draws from the business.

Edited at 14 May 2011 11:53 AM GMT”

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• # 71703
• Thu 02 Jun 2011 11:01 PM

If the client was a sole trader when he pays a supplier via a personal account , I would

Dr - Expense
Cr - Capital Introduced.

If he banks business takings

Dr Drawings
Cr Income

If he was an employee/ director of a ltd company and using his own account to bank takings. I'd point out that it's not his money and belongs to a separate legal entity. 

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