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Thread: How to account for personal and business combined

  1. #1

    Default How to account for personal and business combined

    I know I need to get separate business checking account and am in the process.

    I want to know how to account for my business when personal and business are combined. Can I just iniput my business expeses and use my bank statement as backup. Say I deposit $100, but this is used for business and personal.

    If 50 is used for business, can I just record a deposit of $50 on my books and debit the expense?

    Basically how would I record the items if I gave them to you to account for.

    May need an accountant, cpa or bookkeeper to answet these.

  2. #2
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    If you're a sole-prop business, people don't always separate the finances (if you're an LLC/LLP, or a corporation and you didn't separate them, you have a potentially bigger liability problem that you should discuss with an attorney), so you're not in too terribly strange waters.

    Before I started being serious about my business, I just kept and recorded my receipts for business expenses and kept track of the revenue and let my accountant manage how it ended up on the tax return later. Yes, if you're keeping your own books and you made $50 from the business that goes in the credit site, and any receipts for business expenses go into the debit side. But when you open your bank account, you'll likely want to start a new set of books so that the bank account and those books match at the end of the month.

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    If you are a sole proprietorship you probably won't have too much trouble doing it the way you are. If you are a Corp or an LLC you really don't want to do it that way. in the event of a major problem they can use that to "pierce the corporate shield" in other words any protection of your assets that you have would be null and void. In the event of a major lawsuit of any kind or bankruptcy your personal assets are at risk.
    Ray Badger, Turbo Technologies, Inc.
    www.TurboTurf.com www.IceControlSprayers.com

  4. #4
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    I have clients that do just what you described. I post all personal expenses to their draw account (equity). In your example you would record the $100 as a debit to your checking and a credit to either an equity account (if you are giving the money to the business) or a liability account (loan to owner if you expect to be paid back). When you have an expense (check or debit card) you will credit the bank account and debit an expense for the amount that is business related and debit either the equity account (draw) or liability (loan) for the personal items.

    I also advise all clients to have separate bank accounts, it so much easier to keep up with things.

    Hope this helps and good luck!

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