The Book-keepers Forum (BKF)
The Book-keepers Forum (UK) -> General Book-keeping & Accounting -> Drawings
Post Info TOPIC: Drawings
Doug12


Newbie

Status: Offline
Posts: 4
Date:
Drawings
Permalink  

Hi all,
          I am hoping someone would be good enough to clarify something to me about drawings that are made from a business account.
At the end of the year would the drawings figure come off the profit figure or would it be taken off later. i have been thinking about it and i am sure it would be after the profit has been calculated but would be grateful if someone could confirm this.

I am new to bookkeeping and i am managed to teach myself enough to get thriugh the ICB level 1 with a distinction and i am trying to teach myself level 2 .Drawings are mentioned in the level 1 paper but only briefly and it doesn't show what happens to them at the year end.
 
Sorry if this sounds a silly question but any halp would be great
thanks
doug 

__________________
Shamus


Forum Moderator & Expert

Status: Offline
Posts: 11981
Date:
Permalink  

Hi Doug,

it may seem as though the drawings are against profit but that's not quite the case. They're actually against the capital account.

What actually happens is that accumulated profit is added to the capital and reserves and then drawings are taken against that.

Take a quick example.

Calculate the profit for the year in the P&L of say £13000

In the balance sheet right at the bottom of it you have the capital account which can include all sorts of things but taking a simplest case lets say it includes only the opening balance of £9500.

The net profit for the year from the P&L appears below this. The two are added together and then drawings are taken from that. leaving the closing balance for the year.

Here it is as an example (hope that the formatting stays).

P&L Balance Sheet
£ £
13,000 Capital Account
Opening Balance 9,500
Net Profit For the Year 13,000
22,500
Less Drawings (14,000)
Closing Balance 8,500


Hope that this makes sense,

Shaun.

Well, most of the formatting stayed but all of the lines disappeared. Still think it's readable though.



-- Edited by Shamus on Friday 5th of February 2010 09:34:15 AM

__________________

Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Doug12


Newbie

Status: Offline
Posts: 4
Date:
Permalink  

Hello Shamus,
Thanks for your help it has made it all clear now. i am surprised that sage doesn't have a nominal code for drawings i am using 3100 to post drawings to do you think that would be ok.

doug

__________________
Shamus


Forum Moderator & Expert

Status: Offline
Posts: 11981
Date:
Permalink  

Hi Doug,

No probs.

I'm no great fan of Sage as in many cases it seems to be using a one size fits all sledge hammer to crack a nut but, 3100 sounds fine and is the one most often used as that is in the correct area of the accounts.

cheers,

Shaun.



__________________

Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Doug12


Newbie

Status: Offline
Posts: 4
Date:
Permalink  

Hello Shamus,
Thanks for your reply it has helped to clear up some confusion . I think i will possibly stick with sage to get through the level 2 and then look at other alternatives .

cheers
doug

__________________
Page 1 of 1  sorted by
 
Quick Reply

Please log in to post quick replies.
The Book-keepers Forum (UK) -> General Book-keeping & Accounting -> Drawings
Tweet this page Post to Digg Post to Del.icio.us
Members Login
Username 
 
Password 
    Remember Me  
©2007-2024 The Book-keepers Forum (BKF). All Rights Reserved. The Book-keepers Forum (BKF) is a trading division of Bookcert Ltd. Registered in England Company Number 05782923. 2 Laurel House, 1 Station Rd, Worle, Weston-super-Mare, North Somerset, BS22 6AR, United Kingdom. The Book-keepers Forum and BKF are trademarks of Bookcert Ltd. This forum is a discussion forum only. There will usually be more than one opinion to any question and any posting should not be viewed as a definitive solution. No responsibility for loss occasioned to any person acting or refraining from action as a result of any posting on this site is accepted by the contributors or The Book-keepers Forum. In all cases, appropriate professional advice should be sought before making a decision. We reserve the right to remove any postings which are offensive, libellous, self-promoting or engaged in covert marketing. We will not notify users of removals. The views expressed in the forum posts are those of the individual and do not necessary reflect or agree with those of The Book-keepers Forum. Any offensive or unsuitable posts will be removed by the moderators. Any reader of this forum can request for a post to be looked into by sending an email to: bookcertltd@gmail.com.

Privacy & Cookie Policy  About