Record Bank Transfers Between Accounts

Sometimes you need to record transfers between banks. This can be between two business accounts or from the Personal Account in the case of a Sole Proprietor to/from the business account. If the transfer is from one business account to the other, you record a debit to the account the funds are being transferred to, and a credit to the one being transferred from. For example, you transfer funds from the operating account to your payroll account. Debit the Payroll account and Credit the Operating account.

However, If you are transferring from your personal bank account to the business account, then this is considered an equity investment in your company. In this case you would debit the Operating account, where you are transferring the money to, and credit the Owner’s Equity account.

If you are transferring money from the business account to your personal account, this is considered an Equity Withdrawal. In this case you would do the opposite, debit the Equity account and credit the business bank account.

Provided by Alamo Bookkeeping Associates

How do I record Sales Tax?

If you have a business that has to collect sales tax, when you record your sales figures, there should be a separation for the portion of sales tax you are collecting from your regular sales. For example, you sell 10,000 in retail sales but with sales tax the total you collected was $10800. Your entry for bookkeeping purposes should be reflected as a debit to your bank account and the two credits, one to the sales account for $8000 and one to the sales tax liability account for $800. Do not record the sales tax portion as sales. Some people record the total amount collected as sales and then back out the sales tax from the sales account each quarter. However this is not correct because it overstates your monthly sales figures. Sales tax is not considered an expense, it is considered an item you are collecting for the government. Sales tax should never be recorded as an expense item.

Provided by Alamo Bookkeeping Associates