This guide details how to generate Special Purpose Financial Reports (SPFR) for a Sole Trader entity in LodgeiT using a direct Excel import or cloud ledger sync.
- Demonstration using direct excel import
- Mapping equity accounts including owner's drawings and capital introduced
- Reconcile net profit and balance sheet values against source records.
- Compile compliance-ready financial reports for the chosen financial year.
Related Article:
How to account for Sole Trader Equity
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Working with "Financial Reports"
Example 1
Start at Financials. Make sure you've connected your accounting system and completed the import to secure the data for the year in question.
If you don't have financial data available via one of the connected cloud accounting platforms you can use the an excel direct import or LodgeiT Smart Excel Utility Tool to easily convert and reports from almost any accounting system including all legacy desktop systems.
The Financials sector will allow you to see your imported and reports.
In the Financials section of LodgeiT, select profit & Loss. The net profit should be exactly the same as the net profit visible in your source accounting system.
Navigate to the Financials section and select Balance Sheet to confirm that your imported financial statements balance accurately.
Note, that this section displays a structured balance sheet view rather than a standard trial balance. Negative Values (-) represent Debit balances (such as cash, fixed assets, and owner drawings) while Positive Values (+) represent Credit balances (such as liabilities, capital, and revenue).
Note that we have a special equity category account for recording drawings transferred to retained earnings. At the start of each new period, you'll need to post a journal with a debit drawings to and a credit to drawings. If you have capital introduced, you'll need to do the same.
Navigate to Accounts to carry out classification of the imported line items. You have two entry point options.
Use the following, market classification categories for your sole trader.
Example of classification from the financial report extracts shown above. Note where the drawings to line is classified to.
Once you've classified the imported financial statement line items you are ready to generate Special Purpose Financial Reports for your sole trader.
Select Reports and then Custom Reports.
Now choose a template. Currently you have two options.
Name your report and select a financial year.
So long as all your sole trader details are included at Settings -à General & Settings -à Contact Details, you should get the following
Example 2
Opening Balance Equity is an account that's used to automatically capture opening adjustments in 'QuickBooks Online'. i.e. if I start a bank feed on 1 July 2010 and create an opening bank balance of $10 i.e. a debit, 'QuickBooks Online' will automate the credit into the Opening Balance Equity account. The same approach applies if in 'QuickBooks Online', User adds a list of creditors and/or debtors. Essentially, 'QuickBooks Online'uses this account to ensure the system cannot go out of balance. If you see a 'QuickBooks Online' file with a value in this account, it means fixes are required.
A better understanding of Opening to Closing Balance flow (Charlie names it as a roll-forward) can be seen with equity of a sole trader - see following example -
View of equity section of special purpose financials under reports in LodgeiT.
View of balances in Xero Financials section.
Equity line item mappings in Accounts module in LodgeiT. Note how drawings are offset to the retained earnings since the story is that owners drawings are paid from retained earnings and therefore reduce retained earnings. EXACTLY as dividends are paid from retained earnings in a company.
NOTE:
- This has been posted an opening journal to move 2019 drawings to Retained Earnings section since - systems like 'QuickBooks Online' and - Xero doesn't use all these concepts
- Drawings account is perpetual in Xero without moving the prior year values out to retain.
Related article:
How to account for Sole Trader Equity
Other Related Article:
The LodgeiT Approach on Preparing "Financial Reports"
Financial Report - E Signature
Managing "Financial Report" Template