Keep business and personal money apart
Mixing your own money with the business makes the records hard to trust. See why a separate account helps and how to record money you take out.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
In this room: 3 tasks, 9 questions
- Why a separate account helps3 questions
- Money you take out and money you put in3 questions
- What the money was for decides it3 questions
A sole trader and the business are one person. The records still have to show the business money on its own.
A bank account used only for the business is the simplest way to do that. Every line on its statement is then a business line.
- With one mixed account, a business cost is easy to miss
- A private cost can be counted as a business cost by mistake
- Checking the records against the bank takes far longer
| Date | Details | Paid out |
|---|---|---|
| 1 May | Trade paint supplier | 86.40 |
| 2 May | Supermarket, family food shop | 54.20 |
| 3 May | Dust sheets and brushes | 31.50 |
| 4 May | Cinema tickets | 22.00 |
| 5 May | Van fuel for the Okafor job | 45.00 |
Answer the questions below
2 more questions follow in this task.
Money you take out of the business for yourself is called drawings. It is not a business cost.
Money you put into the business from your own pocket is called capital. It is not business income.
Answer the questions below
2 more questions follow in this task.
If you pay a business cost with your own money, it is still a business cost. Record it and keep the receipt.
Only money earned from customers is business income. Savings you pay in, or a private loan repaid to you, are not income, whichever account they land in.
Answer the questions below
2 more questions follow in this task.