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Pal2's avatar
Pal2
User
19 days ago
Solved

Personal Income

Hello

I am using Account Business Lite. Is Personal Income my personal money I put in to start my sole trading business? And is Personal expense the money I transfer back to myself?

Thanks

  • Earl_HD's avatar
    Earl_HD
    17 days ago

    Hi Pal2,

    Thanks for your response. I recommend consulting with an accountant for an accurate solution, but here's how I would handle this situation. Initially, record the money you put into your business as a loan from yourself, creating a liability on your balance sheet representing the amount owed to you as the owner. When you wish to withdraw this money, classify it as an owner's drawing, reducing the loan liability on your balance sheet and reflecting the funds withdrawn for personal use.

    Feel free to post again, we're happy to help!

    If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

    Regards,
    Earl

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  • DuncanS's avatar
    DuncanS
    Ultimate Partner
    5 days ago

    Pal2Earl_HD 

     

    Traditionally, a Company would have say $2 of Capital and further monies lent to the Company by the Director would be a loan.

     

    I believe a Sole Trader should use a Equity Account called Owners Capital/ Drawings. It may be that 2 accounts are used eg Owners Capital and Owners Drawings.

     

    Duncan

  • Earl_HD's avatar
    Earl_HD
    MYOB Moderator
    17 days ago

    Hi Pal2,

    Thanks for your post, and welcome to the Community Forum! In situations like this, consulting with an accountant is advisable for an accurate solution. However, to give you an idea, "Personal Income" and "Personal Expenses" have specific meanings that differ from what you might assume based solely on their names.
     

    Personal Income: This refers to income received by the business owner or sole trader that is not related to the business itself. It could include income from other sources like investments, rental properties, or a secondary job that's not part of your sole trading business. Money you put into your sole trading business at the start (i.e., capital contributions) isn't usually categorized as "Personal Income" in accounting terms. Instead, it's part of the equity or capital section of your business's financial statements.

    Personal Expenses: These are the expenses incurred by you personally, not by the business. They include costs related to your personal life, such as groceries, rent or mortgage payments for your home, personal utilities, entertainment, etc. Money transferred from your business account to your personal account isn't categorized as a "Personal Expense" within your business's accounting. Rather, this transfer represents a withdrawal or distribution of profits to you as the business owner.

     

    Feel free to post again, we're happy to help!

    If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

    Regards,
    Earl

    • Pal2's avatar
      Pal2
      User
      17 days ago

      Hello Earl

      Thank you for your response, it is a little clearer now. My real issue is the money I put in at the start is like a loan from myself as the owner. Now that my business is going well, I want to take this money back, like a owner's drawings. I don't really want it to show as capital.

      Thanks again

      • Earl_HD's avatar
        Earl_HD
        MYOB Moderator
        17 days ago

        Hi Pal2,

        Thanks for your response. I recommend consulting with an accountant for an accurate solution, but here's how I would handle this situation. Initially, record the money you put into your business as a loan from yourself, creating a liability on your balance sheet representing the amount owed to you as the owner. When you wish to withdraw this money, classify it as an owner's drawing, reducing the loan liability on your balance sheet and reflecting the funds withdrawn for personal use.

        Feel free to post again, we're happy to help!

        If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

        Regards,
        Earl