Setting up required accounts for paying sole trader

Roland

Hi Everyone,

I have just closed a company and have started out again as a sole trader.

I have set up a new entity in Reckon and used the simple Chart Of Accounts option during interview, (perhaps too simple) so I'm missing some basic accounts

I would like to know the correct way (accounts) to set up for paying myself, please.

I would like to use the Write Cheques and post to Drawings account. I need to know the correct name for the payee field, and what account type to create for this name.

I did notice the Transfer Funds option, in which I could use Trading Account in the From and Drawings (equity) in the To, but don't understand the impications.

I would really appreciate some help to get this set up correctly before I start taking money out of the Bank

Thanks in advance

Kris_Williams

I would create drawings as an other expense account and you can write many things in the payee field - your name, drawings, whatever makes sense to you.

Roland

@Kris_Williams thank you, that was quick!

Reckons says use the drawings (equity) account in COA for these payments to myself. Are you saying this incorrect, and should be an Other Account? please explain.

Yes, I'm easily confused with accounting 😊

Acctd4

Reckon is correct - Drawings as a Sole Trader are NOT an expense, you need to set up an Equity-type account in your CoA for this.

You were on the right track to start with - Create yourself as an "Other Name"-type (this allows you to run name-relevant reports & matches more accurately with what you'll see on your bank statement) & enter a Write Cheque for each drawings amount that you pay yourself.

NB You can use Transfer but I prefer the Chq option because it allows for more detail 😊

Roland

@Acctd4 , Awesome. Thank you so much for the clarification.

@Kris_Williams, @Acctd4 Thank you both for responding to my post. Much appreciated. ☺️

Acctd4

You’re very welcome @Roland ☺️

Kris_Williams

Yes of course Shaz is correct, I sometimes use Equity and sometimes Other Expense - depends on business and accountants requirements