Personal Transactions in the Company Account
(Fort St. John BC)
Bookkeeping is sometimes like doing a puzzle.
I am having trouble deciding the best way to do one of my clients bank reconciliations.
The client is a sole proprietor but has been in the habit of using the company chequing account for anything and everything personal ... more than business expenses. There are at least 100 personal expenses compared to maybe 30 business transactions every month.
Any input would be greatly appreciated if there is an easier way than entering each transaction as an owners draw.
As it costs the client money for you to process any personal transactions running through their account ... given the volume of transactions you have stated ... you could mark each monthly chequing statement with a "P" for personal beside any personal transaction ... or conversely mark a "B" for each business transaction which means all remaining transactions are personal.
Once you've recorded each business transaction individually to the appropriate accounts, you could enter all the "P" transactions to the owner's draw as one lump number with a memo referencing the statement.
On a go forward basis, you want to explain to your client why it is better to have separate accounts
- one for business and one for personal expenses.
Try to convince your client that it is better to take regular draw and then explain the mechanics of how to take the actual draw
. Making these two changes could help make any future tax audits go more smoothly.
At the same time, explain to your client it is a good practice to start a log on all personal incoming funds that are not related to the business. The purpose of the log is to prove the funds are not business income