Transfers between different bank accounts - How to record?

[Maf. King]

On Monday 10 August 2009 05:07:17 Victoria_Stuart wrote:
> August 09, 2009
>
> Hi - I have several personal bank accounts, and also some investment
> accounts.  When I transfer funds from one to another, how are these
> recorded - as an Income entry and a matching Liability entry (with these
> set up for each account)? Or, is there some other way to record these
> transactions, that don't affect my overall equity (just where the assets
> are)?

Hi Victoria,

Bank accounts (with a positive balance) and investments are all "assets" in 
the strict accounting sense.  You may have your GC tree set up slightly 
differently to this (ie. not putting all asset accounts under the "Assets" 
parent), and that is fine.  

A transfer from a bank to another investment account is a kind of "conversion" 
of an asset.  Income & Liability accounts shouldn't be affected if you move 
say $100 from "checking" to "savings".   

(There may, of course be brokerage fees etc. if you are investing in certain 
products, these can be shown in GC with a split transaction - eg: $100 from 
checking, $95 to "assets:somthing"  and $5 to "expenses:transaction fee")

Equally, if the business were to buy something with a long expected lifetime 
(computer, machinery, motor vehicle etc.) then that is also treated as "asset 
conversion" (at least by the UK tax authorities, anyway).
eg. you buy some fangled machine for $1000 - That is not an expense but the 
machine becomes something called a "Capital Asset" and you are allowed to 
claim a percentage of the value each tax year maybe 25% ($250 "allowed 
depreciation") - I'd suggest a chat with an accountant in your jurisdiction 
about this, though!
  
>
> Second, same question, but for transfers between my personal bank accounts
> and my professional bank account (in separate Personal and Professional
> Ledgers, respectively)?  In this case, my equity *is* being shifted around
> (personal <> professional accounts).
>

Here, there will be different answers depending on exactly what is happening.  
Are you taking a "salary" (or drawings) from the business, or are you dealing 
with "loans" between personal and professional accounts?

regards,
Maf.




> Thank you in advance for any comments / clarifications - much appreciated!
>
> Sincerely, Victoria  :-)