I am a sole trader running a gardening business. My customers pay by directly into my business account and I draw all payments out into my personal account (as income). What should I be allocating this from my bank feed? Is this Owners Funds Introduced/Personal Income OR Owners Drawings/Personal Expenses? Very confusing???
Hi Evergreen3
Sounds confusing.
If you are running a sole trading business you should at least in MYOB try and keep personal and business distinct - else you will pay for your accountant to sort it out.
Yanike_S is right but didn't quite explain it enough probably because MYOB moderattors a conservative in accounting information.
If you have gone to the trouble of setting up an MYOB file for your business then you should try and keep private and personal at arms length - a very good thing to do with the ATO.
I assume you generate all your business invoices from MYOB and these would be allocated to income = 4 -Sales
You didn't mention GST but if you are so registered this goes to a liability account to pay the ATO - 2- GST on Sales (if not registered then nil)
If you bought some supplies using your business name to supplly to a customer to charge in their invoice then these go to Cost Of Sales - 5-Client Purchases of Plants ( and if so registered you could claim GST back on these purchases) the GST goes to 2 - GST on purchases
And if you used some fuel to get to your clients and it is a company vehicle or personal vehicle - then there might be some expenses - 6 - M/V expenses
You have just invoiced a client for gardening plus plants for $1100 incl and they pay you immediatly into your business account = $1100
Transferring all this income to your personal account to pay expenses is not an arms length thing.
Best you pay all your work expenses from the business account - eg fuel for the vehicle $44.00 goes to expenses (however if you pay your fuel and expenses from your personal account - this gets real messy to sort out by yourself and the accountant or book keeper).
Hence my long winded reply.
Best you don't transfer all income to your personal account - just a wage or if not a wage - drawings.
Which would be a drawings 'spend money' from your business account to an equity account called
3 - xxxx Owner drawings & Funds Contributed
And this keeps it tidy and arms-length for your book keeper and accountant.
If you don't then someone has to sort it out and this can be a nightmare.
The Doc
Hi Evergreen3
Thanks for your post. Generally speaking any money you draw out of your business into your personal account would be allocated to an equity account. If you want you can rename the accounts to avoid confusion: Accounts list.
If you are not sure on which accounts to use in your situation I would recommend speaking to your accounting advisor.
