money left in business bank account

by **stapler** on Sat Nov 19, 2011 4:24 pm

Hi

At the year end should I be moving the balance out of the business account and then bringing it back in as capital introduced ?

For an easy example lets say Net Profit = £10,000 and tax has been paid on that amount. I draw £6000 to live off but leave £4000 in the business account. This £4000 then gets swallowed up it the running of the business.

Am I being taxed on that money twice if I leave it in the business ?

Thnaks

by **pawncob** on Sat Nov 19, 2011 9:49 pm

No.
A. It's treated as Drawings.
B. It's treated as Cap Intro.

No you're not being taxed twice. You're taxed on profit, not capital movements

by **mullet** on Sun Nov 20, 2011 12:01 pm

Am I being taxed on that money twice if I leave it in the business?

No. Money in the business account may well be net profit on which you have paid tax. If you take it for yourself (drawings), then there is no further tax consequence. The bookkeeping would be debit drawings, credit bank. If you then reintroduce it as capital, the bookkeeping is debit bank, credit drawings. So there is no effect.