Record transfer between personal and business account
PersephoneC
Member Posts: 6
Can anybody talk me through how to record a transfer between my personal account and my business account in Wave? Sometimes I need to move money from my personal account back into the business to help pay for a large expense etc. and I'm not sure how this should be recorded.
When I look under the 'Transfer to bank, credit card, or loan' category, there isn't an option to choose my other account. The only account visible is 'Cash on hand' which I haven't used before.
This is my third day using Wave so this is all still quite new to me and I'd greatly appreciate any help! Many thanks in advance for shedding some light onto this.
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Comments
Hi, @PersephoneC!
Before I answer your question, welcome to Wave! I hope you'll enjoy your experience and if you need any help at all, well, you have a growing Community of Wavers right here!
First, you'll have to create an account on your Chart of Accounts for your bank account. If you're looking for a good place to get started with Wave, I recommend checking out Fearless Account with Wave. It's a great little document, but for the purpose of this conversation, just check out page 18 and follow the set-up instructions there. They'll get you started right.
When it comes to putting personal money into your business or to paying yourself, the process is pretty simple. You have an account called "Owner's Investments/Drawings". Whenever you move money from your personal bank account to your business, just create an income transaction to your business' bank account with the category "Owner's Investments/Drawings". When you pay yourself, do the same thing, but make it an expense instead. There's a bit more work to do if you pay for a business expense directly out of your personal account, let me know if you need me to walk you through it.
Hi Alexia, thanks for your reply. I didn't know there was a pdf document that explains how to use Wave - I'd just jumped right in and was trying to figure it out myself so thank you very much for that!
Thanks for explaining how to deal with transfering money between business and personal accounts - that makes more sense now and I've followed your instructions. I've already read the article on paying for business expenses with your personal account and have set up journal transactions where needed. Thanks again, it's great to be part of the Wave community!
Really happy to help, @PersephoneC!
If you want to give us your thoughts on Fearless Accounting, post them on this thread. We'd love to hear what you think, especially given that you are a new user!
Thanks Alexia - I'll do that once I've had a read through of it properly.
@Alexia After reading this discussion, I think I may have been doing my business-to-personal transactions incorrectly - Whenever I had wanted to pay myself from my business, I was setting it up as a TRANSFER from the Business Basic Checking to Owner/Investment Drawings (so it was linked to my Personal Wave Acct). Have I been doing it wrong? Or is my process essentially the same as creating an expense transaction to my business' bank account with the category "Owner's Investments/Drawings" (as you described above)? Thanks!
Hi, @AshleyO.
It ends up being the same. As far as your reports are concerned, everything will look the same regardless of how you handle this. You'll just have a few extra transactions on your transactions page.
Note that it isn't possible to make a transfer between Owner's Investments/Drawings and a payment account in the new version of Wave, so you'll have to change methods later down the road, but in the end, the numbers are the same.
Thanks for clearing that up! I'll switch to the new method of recording business/personal transfers. Are the transfers I've already done still going to show up in the new version of Wave, or do I need to re-do them in the way that you described? I just don't want any of my old transactions to disappear. Also, when are we changing over to the new version of Wave (this is the first I've heard of it)?
Hi, @AshleyO.
They won't disappear, that much I can promise. We care a great deal about the integrity of your data and we wouldn't risk you, or any other Waver, losing anything over this update. I can't tell you exactly what form those transactions will take just yet (they might, for example, be made into simple income/expenses, or be left as transfers, but be impossible to replicate), but we're committed keeping your data whole.
Our goal is to be done moving everyone over within three to six months, so it won't be very much longer.
Thanks, @Alexia!
No problem at all!
Hi Alexia,
Quick question on this subject. My business and personal checking accounts are both connected to wave.
I recently withdrew money from my personal then deposited it into my business checking.
Wave automatically recognized them as a linked transfer. Is that fine or should I unlink them?
Thank you in advance,
-H
Hi, @hshokunbi.
I wouldn't recommend connecting both of these accounts to your business, since your personal account isn't a business account, and that might affect your numbers at the end of the day. You should be using the Owner's investments/Drawings account to represent your investing money in your business or taking money away.
This way, you can ensure that personal expenses don't end up mixed in with your business' accounting.
My business checking is under my Business "profile" and my personal checking is under my Personal "profile" so my business is separate from my personal.
My original issue:
I recently withdrew money from my personal checking then deposited it into my business checking.
Wave automatically recognized them as a linked transfer. Is that fine or should I unlink them? If I unlink them, how should I categorize them?
Thank you in advance,
-H
Hi, @hshokunbi.
Could you show me screenshots of what that looks like on your end? It should be entered as an income transaction to your business account with "Owner's Investment/Drawings" as the category, but I'll have a better idea of what might've happened if I can see what it looks like.
Hi, @OyinkanMak, it isn't possible to merge two Wave accounts that way. You'll have to enter the information from one account in the other. I also strongly recommend removing your email address from your post. The Wave Community is public and posting your email here makes it available for the entire internet to see. If these addresses are not meant to be public, I suggest removing them from your post as soon as possible.
Please see the screenshots below:
TIA,
Halid
Hi @hshokunbi,
That is something that can happen in the old version of Wave. Your accounting is still accurate, even if it isn't how this would be handled in the new version. It isn't necessary to change anything unless you really want this to appear as "Owner's Investments/Drawings" in your reports instead.
cool. thank you
Hi, I don't seem to have the "Owner's Investments / Drawings Accounts" - I have "Retained Earnings / Deficit"; has it had a name change or do I need to add it?
@Julie Typically, the "Owner's Investment/Drawing" Accounts are located in your Chart of Accounts, under the heading "Equity". Are you able to confirm that this does not show up in your Chart of Accounts? If not, then you can add the account there.
Hi, Yes I'm looking under Equity. It's under the account type "Retained Earnings: Profit and Business Owner Drawing" with the account name "Retained Earnings/Deficit"
Hey @Julie, do you see the sub-header under Equity called Business Owner Contribution? If there isn't already an Owner's Investment/Drawing account set up there, you can add it by clicking Add a New Account.
From personal to business, business side is “owner investment.”
From business to personal, business side is “owner draw.”
What about the personal sides??
Hey @joshbruce !
To account for a business transaction from a personal bank account:
Start off in the Personal profile. Categorize the expense (or receipt) to Owner Investment/Drawings. Boom, you’re done on the personal side. Head over to the business profile and add a transaction that affects the appropriate account, and categorize it as Owner Investment/Drawings
To account for a personal transaction from a business account:
In the business profile, categorize the transaction that you consider to be a personal expense to “Owner Investment/Drawings.” Head over to the Personal profile and create a transaction that affects the relevant account, and categorize it as “Owner Investment/Drawings.”
The allocation is done automatically depending on the transaction type selected (deposit or withdrawal). Below is an example:
Personal Account:
1. Deposit transaction - Owner Drawing
2. Withdrawal transaction - Owner Investment
Business Account:
1. Deposit transaction - Owner Investment
2. Withdrawal transaction - Owner Drawing