Sunday, December 4, 2011

How do I account for transfering money between a business and personal checking account?

I have a business checking account (sole proprieter) and a personal checking account. I will at times transfer money from my personal account to my business account when funds get low or if my business account has more money, I will transfer some to my personal account to spend freely. Is this a wrong way to be doing things? Should I be doing some sort of documenting? Does the IRS care about this come tax time even if I keep track of sales for the business?|||Whoever does your end of the year taxes would be able to help you set this up.





You should use a Draw account and a Capital account for these transactions.





When you take money from your business and put it in your personal account you should list it as a Draw.





A Draw allows the owner to withdrawal cash or other assets from a propietorship.





When you take money from your personal account and put it into your business it should be listed as Capital.





Capital is money or other assets that an owner brings into a propietorship.





An accountant or bookkeeper can set up a program for you, such as QuickBooks, where you can track all your expenses and income and keep up with money transfers. That way you will feel better about your finances and make sure everything is getting accounted for.|||It muddies the waters when you do this, but as a sole proprietor, it only matters what you have grossed in sales %26amp; spent in legitimate business expenses.





Do you use any type of accounting software to keep track of business expenses?

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