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Personal Income

Pal2

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

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Earl_HD

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money, classify it as an owner's drawing, reducing the loan liability on your balance sheet and reflecting the funds withdrawn for personal use.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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Earl_HD

Hi @jojolamor

Welcome to the Community Forum! You're very welcome. Feel free to start a new post if you have further queries and one of us will be happy to assist.

Regards,
Earl

jojolamor

Thanks - very helpful -

So ... I'm called them as follows!

owners drawings/personal expenses
owners funds introduced/personal income

Appreciate your help!

Earl_HD

Hi @jojolamor,

In MYOB's Business (Categories) chart of accounts, "Funds Contributed" and "Drawings" are not standard accounts, which might be causing some confusion. These accounts are indeed important for sole traders, as they help in tracking personal contributions and withdrawals from the business.

To clarify:

"Funds Contributed" typically refers to the money that the owner puts into the business. In MYOB, this is often categorized under "Equity" accounts.

"Drawings" refer to the money that the owner takes out of the business for personal use. This is also categorized under "Equity" accounts but specifically tracks the withdrawals.

In MYOB, "Personal Income" and "Personal Expenses" are not standard terms used in the chart of accounts. Instead, the focus is on business-related income and expenses.

I hope this helps!

Regards,
Earl

jojolamor

I'm confused about this too - as I would have expected Funds Contributed and Drawings to be standard accounts in the chart of accounts. I'm confused in the same way as @Pal2 who initiated this question.

Are ... Funds Contributed - the sames as MYOB's Personal Income, and;

Are Drawings - the same as MYOB's Personal Expenses, or ... the other way around.

As stated, I'm surprised these aren't standard in the Business Lite chart of accounts as a lot of users would be sole traders and these are pretty important categories.

Can anyone clarify - this shouldn't be a question to incur accountant costs - it is all just symantic but wanting to get it the right way around.

Thanks in advance. Much appreciated!

DuncanS

@Pal2 @Earl_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

Pal2

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

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