Sole Trader
smercer1982
Member Posts: 1
I’m a sole trader and wondering what way is best for me to categorise my personal expenses. Is it best to bill myself each week for my drawings. For instance add a bill and categorise it as my salary? :)
1
Comments
Hey @smercer1982 and Welcome to Wave's Community Forum!
Sounds like you are paying yourself through owner's draws which is how many other Wavers opt to pay themselves! In Wave, you can categorize these withdrawals as "Owner's Draw" which is an equity account. This will ensure that they show up on your reporting as money leaving the business as it is being used for drawings as you have described.
@JordanD - could you please expand on that one? What does the full transaction (in terms of debits and credits) look like? DR Checking Account and CR Owner's Investment Drawings? How does that affect Retained Earnings account? Should there be any closing entries at the end of the month or year (like DR Owner's Equity and CR Owner's Investment)? I guess what I am asking for is the best practice to record these types of transactions (and set up the chart of accounts) so that:
1. These draws can be made regularly based on net income without affecting initial investments.
2. The balance of net income closes into Retained Earnings
3. The reporting is accurate.
Thanks!
@Kirill No need to create Journal Transactions, as you can create a simple Expense transaction in the Transactions page, and categorize it as Owner Investment / Draws. I can't fully advise on whether or not there should be closing entries at the end of the year as you'd have to talk to your accountant about that, but categorizing your expense transactions as Owner Investment / Draws will accurately categorize these draws so that your reporting is accurate.