USA Accounting for customer payments through personal checking

[brian0918]

I use a free online service that allows customers to pay with their debit card, but this service is linked to my personal checking account. As I get money in my personal checking through this service, I will periodically initiate a transfer to my business checking, but it is not an immediate transfer. How do I account for this in my business books? Do I just create an Asset: "Held in Personal Account" to track this?

For example, at the point I am paid:

Transaction 1:
Asset:Held in Personal Account: $100
Income: Sale: ($100)

Transaction 2:
Asset:Held in Personal Account: $50
Income: Sale: ($50)

Then at the point I transfer money from my personal checking account to my business checking:

Asset:Held in Personal Account: ($150)
Asset:Checking Account: $150

Does this sound correct, or is there a better way to track this?

 

[Samir]

You're right on target with your example, but there's two ways to go about it.

If you are always transferring the exact amount, AND this is the only type of transfer between your personal account and your business account, then do what you did in your example.

If you have other transfers between your personal and this business account, AND you take profit draws from your business, then:
- When payment is deposited into your personal account, on your business books book the payment as capital draw/profit share. You can then just leave the payment in your personal account.
- On your personal books, book those payments as profit distribution/capital draws from the business.
- This method avoids having to actually transfer the money and everything is still accounted for.

 

[brian0918]

You're right on target with your example, but there's two ways to go about it.

If you are always transferring the exact amount, AND this is the only type of transfer between your personal account and your business account, then do what you did in your example.

If you have other transfers between your personal and this business account, AND you take profit draws from your business, then:
- When payment is deposited into your personal account, on your business books book the payment as capital draw/profit share. You can then just leave the payment in your personal account.
- On your personal books, book those payments as profit distribution/capital draws from the business.
- This method avoids having to actually transfer the money and everything is still accounted for.

Samir - thanks! I actually thought about it some more since my post and ended up going the route you suggested. Under "Equity", I have "Owner Equity", and under that I have two accounts, "Owner Contributions" and "Owner Draws".

 

[Samir]

Samir - thanks! I actually thought about it some more since my post and ended up going the route you suggested. Under "Equity", I have "Owner Equity", and under that I have two accounts, "Owner Contributions" and "Owner Draws".

Good to hear you headed this route. I find this the easiest since it reduces the number of transactions back and forth. It's sometimes not as clear as to exactly what happened, but it's all correct so I don't worry about 'why' as much.