EM3681 | Recalculating Profits: Private Expenditure: Cash and Cheque Drawings from Business

When asking for an analysis of drawings, you should ask for drawings by cash and cheque to be distinguished. Wherever possible, obtain an analysis of the cheque drawings covering the whole period of the enquiry. These might include exceptional expenditure which could have been missed had you not called for such an analysis. The accountant may have assumed that the whole of the recorded drawings were available to meet regular outgoings.

Even where business drawings have not been correctly or contemporaneously recorded and the figure in the supporting accounts shown to be correct, such an analysis will nevertheless provide a useful foundation on which to build up the figure of personal and private expenditure. Regular savings are often claimed to have been banked out of drawings. But the analysis may demonstrate that too little cash was drawn to meet known day to day expenditure, let alone to provide a nest egg.

Scrutiny of an analysis of the cheque drawings, even where it covers a substantial period, takes only a few minutes but the knowledge gained may help to add substantially to any additional profits finally agreed.