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Sole trader financial accounts,
fixed assets, profit & loss, tax return spreadsheets
Details of the main
elements of the financial accounting spreadsheets for sole traders
and new start up business
PROFIT AND LOSS
ACCOUNT
The financial accounting
spreadsheets collect the financial records from the sales and
purchases accounting spreadsheets in the format required to produce
a monthly profit and loss account showing the net taxable profit or
loss for each month. The sole trader accounts are an income and expenditure account for the business. By deducting total expenditure from total
income, it shows on the "bottom line" whether your
business made a profit or loss at the end of that period. The profit
and loss account shows how
the business is performing. The financial statement is used to work out
the tax bill and
also prepare an excel financial spreadsheet of the
self
employed tax return.
The financial accounts software automatically
produces the sole trader profit & loss account from the
financial transactions entered in the monthly sales
accounting spreadsheets and the
monthly expenses
accounting spreadsheets
An up to date
profit & loss account available in real time in the financial accounting enabling the sole trader to
consider and improve the financial performance and is useful should it be
required to support financial funding, loans or overdrafts from banks and other
financial
institutions. Having an up to date profit & loss
account available, especially for new start up business, can seriously impress
potential lenders to enable the start up business in particular provide the
confidence to financial institutions to enable arrangements to stave off
possible under capitalisation issues.
This is how the screenshot showing
the simple profit &
loss account as it appears in the financial accounts section of the financial
accounts software.
Sole trader accounting software is
crucial to growing new and existing small business profitably. Many
small businesses go out of business within 3 years of start up. The major
reasons being new start up business lack of
control of profits or trader beyond their financial limits being under capitalised.
Keeping a tight rein on the profit
and loss account provides the sole trader with control over the financial
position and business trend with the opportunity to reverse
adverse trends immediately they appear. Small business finance software that
produces an income and expenditure account is an essential small business tool no new start up
business should be without. Run the new start up business without this financial
software and your success dives into the realm of guesswork.
When using the
sole trader accounts
package it is optional but a good idea to enter the sole trader drawings in a row beneath the last row of the profit &
loss account providing an instant view of the money being withdrawn compared with the
net profit
FIXED ASSETS AND
CAPITAL TAX ALLOWANCES
Fixed items are items such as plant and machinery used by the business over a period of
more than one year. Depreciation spreads the financial effect on profits over the life of
the fixed asset but does not have an effect on the business tax as
depreciation is disallowed as an expense. Instead the business receives
a capital tax allowance on the cost of fixed assets to set against its profit.
When
the fixed asset schedule is completed the capital allowances are
automatically calculated and also update the profit and loss account in
the depreciation column. While depreciation is then disallowed in the
self assessment tax return the same amount is then added back to the
expenses as capital allowances. Capital allowances on vehicles are
automatically reduced by the personal use %.
For
the financial year 6 April 2007 – 5 April 2008 50% of the cost of the
asset can be set off against profits in the year purchased which is
called First Year Allowance. The remaining value of the asset is then
written off against future years profits at 25% of the book value
remaining. The accountancy software has these percentages already
written into the book keeping system.
For 2008-09 the annual investment allowance of 100% of capital
expenditure up to £50,000 has replaced the first year allowance
and the writing down allowance has been reduced from 25% to 20%. If the sole trader
accounts net written down value of
fixed assets is below £1,000 at the end of the tax year the whole balance
can be written off against the
net taxable profit.
SCREENSHOT OF FIXED ASSETS ACCOUNTING SPREADSHEET
Businesses should set a consistent policy in the treatment of fixed
assets and it is suggested that only long term assets (used more than
one year) and costing over £100 should be classified as “fixed”.
INCOME TAX CALCULATOR
The financial accounts
spreadsheets
also contain an income tax calculator to calculate the income tax and
national insurance contributions on the net taxable profit. Click this
link for further details of the sole trader income tax
calculator
SOLE TRADER TAX RETURN
SHORT
Potential the most important
part of the whole sole trader accounts package is the fully automated
completion of the short self employed tax
return
Brief descriptions of the full range
of Accounting Software,
Payroll Software, Company Formation are available
on the DIY Accounting home page
"Sole trader financial accounts
includes profit and loss account, fixed asset capital allowances, calculates
tax liability, completes tax return"
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DIY accounting and payroll
software limited company formation UK 
