sole proprietorship with respect to my PERSONAL books?

[Michael Hendry]

On 13 Feb 2013, at 20:26, Paul Elliott <pelliott at blackpatchpanel.com> wrote:

> 
> I will have 2 books=files, one for my sole proprietorship, the other
> for my person. Everybody said I had to do it that way.  I understand
> that money I initially put into the business will be "balanced" by an
> equity account called "Opening Balances". When I remove money from the
> business, it will be balanced, by an equity account called "Drawing
> Account".
> 
> But how should I view these transactions from the point of view of my
> PERSONAL books? When money disappeared from my personal bank accounts
> to start the business, what is the "other half" of that transaction on
> my personal books? When later money appears in my personal accounts
> from the business, what is the "other half" of those transactions?
> 
> Should I create PERSONAL accounts under equity, that will move in the
> opposite way as the corresponding business accounts? What is the
> canonical way to do this? What should be the name of the accounts,
> when things are done the "standard" way?
> 
> Thank You for reading/answering my dumb question.
> 
> -- 
> Paul Elliott                               1(512)837-1096
> pelliott at BlackPatchPanel.com               PMB 181, 11900 Metric Blvd Suite J
> http://www.free.blackpatchpanel.com/pme/   Austin TX 78758-3117
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Like Mark Phillips, I am not an accountant, but I would advise setting up a "Loan to Business" or similar account as one of your Current Assets. Assuming the business is successful, the money will come back to your bank account and be posted as money coming into the "Loan to Business" account, which eventually reverts to zero. If the unthinkable happens, and the business goes down, you'll have to revalue this loan to zero. This could be done by setting up an Expense account called "Bad Debt Writeoff" - I'm busking it here - you might need to get a proper accountant to advise!

I use this technique to deal with "Bank of Mum and Dad" loans to my offspring, who pay us back as cash becomes available.

Michael