Importing personal bank statement to business book-keeping system

[xenium]

hi,

I have many business transactions on a personal bank account, which I want to file through my business, and for convenience it seems easier to import the bank statement to my book keeping system. I think the following is a book keeping solution to such a process, and also offers a way to exit this unsatisfactory situation. Any comments or suggestions welcome!

Add two accounts to chart of accounts: asset "Personal bank" and equity "Personal bank equity"

The latter represents how much of the "Personal bank" balance belongs to me personally. If the two balance then I neither owe nor am owed any money from the business (at least due to that account)

Say balance starts at 100: debit bank, credit equity
Example spend 20 personal: credit bank, debit equity. All still balanced.
Example spend 30 on business: credit 30 bank, debit expense.

Now bank is at 50 but equity is 70.

Settle this by transferring 20 from biz bank to personal bank (debit personal bank, credit biz account)

Personal accounts now balance 70:70

Say I decide not to use the personal account for business any more (or rarely, so that book keeping is then manageable). Since accounts balance, both personal bank and personal equity accounts can then be removed (or archived) from the chart of accounts.

Does this make sense? Any suggestions / refinements / alternatives?

Many thanks

 

[xenium]

I guess for neatness i should add a closing journal entry before removing the personal account from the books. credit bank 70, debit equity 70 to zero them off.

 

[numbersrule]

You may be over complicating your accounting. Are you a Limited Company? If yes you could treat the expenditure as a Director's Loan and simply repay the transactions to your personal account. Some expenditure from personal bank accounts can be more appropriately claimed back as Expenses.

Perhaps other contributors could make suggestions if you are a Sole Trader.

Your idea of introducing accounts for your personal bank account doesn't make sense. I suggest that is not good practice.

 

[Scalloway]

The solution I would use is just having a bank account for business transactions only. However if the OP wants to use a bank feed then his method is acceptable.

 

[xenium]

Thanks for your replies. For this question I'm a sole trader. I do have more than one personal bank account, and mostly one is set aside for this business.

I'm migrating from spreadsheets to a proper book keeping system, possibly going back 18 months. Sorry I should have highlighted that in the question.

My suggestion is really just a way of processing a backlog of transactions as simply as possible. ie it seems easier just to connect the account to Xero (and/or bulk import) and pick out the business ones, the rest going to a temporary equity account.

 

[Somos Accounting]

Thanks for your replies. For this question I'm a sole trader. I do have more than one personal bank account, and mostly one is set aside for this business.

I'm migrating from spreadsheets to a proper book keeping system, possibly going back 18 months. Sorry I should have highlighted that in the question.

My suggestion is really just a way of processing a backlog of transactions as simply as possible. ie it seems easier just to connect the account to Xero (and/or bulk import) and pick out the business ones, the rest going to a temporary equity account.

Have you had a look at FreeAgent software? If you have a business bank with Natwest/RBS its free too.

It has the facility to link a personal account and as long as it is marked as such, you only need to explain the business transactions (you can leave the personal ones unexplained). If you're looking to move from spreadsheets a bulk import of your bank transactions is easy enough to do via CSV so you can then explain them there.

 

[xenium]

Thanks for the suggestion. I'm looking to minimise the workload and number of tools required. Using a book-keeping tool like Xero or Wave I think will allow me to tidy everything up, and then in due course extricate any personal accounts. Yes probably CSV import is needed to tag the legacy transactions.

Thanks again

 

[MyAccountantOnline]

I too think you are over complicating it.

If you've used another bank account for business transactions (and assuming Xero will enable you to do this, the online system I use Accounts Portal does) why not import all of the bank statements and then before processing the transactions delete all private transactions? I'd set up a bank account called 'private bank account' and once you've entered all transactions you can debit the total receipts to drawings and credit the total payments to capital introduced to clear the balance.