P&L Accounts

[NickToye]

I'm confusing myself with figures.

If I work from home and I can portion off some of my home expenses as business expenses (like 1/5th or whatever it is), how will that effect my P&L?

What I'm trying to say is if I have my Personal Survival Budget set with all my true expenses to live at home, and I discover I need to provide X amount from my business drawings to survive, when I go to do my P&L account and I have my drawings as an expense, do I then have to put in my 1/5th expense of my household expenses?

Am I making sense?

[Indizine]

Your 'survival' budget - something usually included in your business planwhich makes you consider if you can even run the business, doesn't go into your accounts. The only figures you will be accounting for are your expenses for running your business. The heating costs for exmaple, you would have to pay if you had an office, so in working from home, you are having to have the heating on all day at home to keep warm, thus you can consider that 20% of your heatin bill can be apportionedto your business. The same for other utilities.

Your own personal survival expenses (outisde of heating, electric, water, telephone - things in your house needed to run your busness) are not takne into consideration anywhere as you will pay yourself a salary which you live off, just like any other person.

[NickToye]

Yeah I know that - but If I have say £100 for my rental of my home that I put through as a business expense, and I also put say £800 drawings which I require to settle my PSB, then that is not a true figure because my PSB accounts for £500 of my home rental.

So I am taking £800 to part pay for £500 rent, however £100 of that is already accounted for in my P&L also.

Does that make sense?

[Indizine]

you cant put your rent though as an expense.

I think you are getting the survival budget bit mixed up with your accounting.

You take a wage to pay for your personal living expenses.

You can only claim for a portion of your utility bills for working form home because you are saying that you are effectively having to heat the home, use water and electric and telephone, in order to run the business. You can't laim a portion of the rent because it is your home anyway and you live there 24/7 whether you are in it or not. Wheras with utilities, if you didnt work form home, you wouldnt be using them and thus generating a bigger bill as a result. If you didnt work form home, you would no have to keep it warm during the day, make coffees, run PCs etc from the electric, run up the phone bill, and so on.

So lets say your utility bills come to £1000 a year, you might claim 20% of that per year aainst your business, ie £200 for the year.

[NickToye]

Ok, so I can discount the rent from that.

However, I don't think I am mixing them up. Basically what I am trying to say is I have to take £1000 drawings to cover living expenses which includes Utilities etc. So say I have for arguments sake £100 a month utility expenses which I put through as a business expense.

I have Drawings + Utilities as an expense out of my P&L.

But the figure I have come to for my Drawings is based on my living expenses, which includes utility bills.

[Indizine]

Forget your living expenses when doing accounts. I can see now what you mean but on't worry about that.

Consider only what your total utlities are for your home, and use 20% of that as an expense in the business. Plus, take your wage separately and regardlessly.

[NickToye]

Ok, so I don't put in my utility expenses in my P&L. Stuff like gas, electricity etc - I don't put that in as an expense?

[Indizine]

yes as per my last post, work out your total utlities for your home, and if you decide that 1/5th is apportioned for business use then calculate 20% of that total, and put that down as an expense. Is that what you mean?

[NickToye]

yes as per my last post, work out your total utlities for your home, and if you decide that 1/5th is apportioned for business use then calculate 20% of that total, and put that down as an expense. Is that what you mean?

Pretty much.

This is what I have for my P&L expenses:

Drawings - £xxx
Gas - £xxx
Elec - £xxx
H20 - £xxx
Phone - £xxx
etc....

I did have things like Rent, CTax and House INsurance, but if they are not allowed I can remove them.

[James Smith]

Nick - I would do as indizine suggests- don't muddle business and personal items. That is something for much later down the track when trying to trim your tax bill down a bit.

It sounds like you are right at the start at the early planning stage.

Work out how much per month you spend to run your life, and then that is how much you need to take out of the business per month (assume 30% of your drawings will go in tax if you are a basic rate tax payer)

That is to say if you need £1,400 per month for your bills, you need to make £2,000 per month profit from the business before tax.

You can then work out how many sales you need to generate that £2,000 per month profit which presumably is what you are trying to do to see how risky your new venture is and if the kids will be eating bread and jam for their tea or not.

Hope that helps

Regards,