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