Introduction
The private account is used to clearly separate business and personal expenses. In business accounting, no personal expenses may be deducted from business profits. The easiest way to maintain this separation is to use separate bank accounts and to make all purchases, etc. separately. In this article, we show you how to separate personal expenses from business expenses.
If mixing personal and business expenses cannot be avoided, personal withdrawals can be posted to the “Private Account” in the accounting records.
The private account works as follows:
- Positive balance (CREDIT entries): Business expenses were paid with personal funds.
- Negative balance (DEBIT entries): Business funds were used for personal expenses.
Transfer in the New Fiscal Year
At the beginning of each new fiscal year, the balance of the private account is offset against equity. In KLARA, this can be done with a manual entry.
In KLARA, the following accounts are available for recording private transactions:
- Cash Withdrawals: This account can be used both for personal withdrawals and personal contributions. In principle, all personal transactions can be processed through this account. The following accounts can be used for a more detailed breakdown, but this is not required.
- Non-Cash Withdrawals
- Private Shares of Operating Expenses
- Imputed Rent for Private Residence
- Private Insurance Premiums
- Private Pension Contributions
- Private Taxes
- Other
Examples of the two most common entries to the private account:
1. You have just become self-employed and have not yet opened a bank account for your business.
You paid the first invoices for your newly established sole proprietorship from your personal bank account or with cash. To record the expenses, which are business-related, select the “Private” payment method in the booking workflow.
2. You withdrew cash from the business account at an ATM, which you will use for personal purposes.
You now do the business accounting and record the personal withdrawal during the bank reconciliation using the following option: Click the book icon, select “Other Entry,” and select “Private Account.”