I was just wondering what account I should use to record my personal tax return fund? I realise it’s not really ‘business money’, but it is paid into my business account, so I need to account for it accordingly.
Do not. This isn’t a business transaction. One more reason not to mix personal and business uses of the same bank account.
If you insist on leaving it in the business account, treat it as another contribution of capital. Or permanently give up being able to reconcile the account.
Yeah, I don’t normally combine personal & business finances, and have always had separate accounts. But the tax office keeps using this account. I’ll have to ask my accountant to change things!
So I guess I should just withdraw the funds as drawings? And contact my accountant …
You need to consider the entire picture. The tax refund wasn’t a business transaction in the first place. It was your personal money. But it ended up in the business account, so it represents a contribution of capital, which increases your equity. Once you’ve got it entered, then you can withdraw it as a draw. Just understand that it didn’t come from a customer or anywhere else that can be recognized as revenue of the business. It was your money and mistakenly got deposited in the business account.
It’s completely OK to receive personal income tax refund into business bank account, you just need to be careful how it’s categorized. As @Tut said, technically it’s a funds contribution (even if you withdraw it the next day).
If you are not using
Capital accounts tab, see: http://guides.manager.io/businesses/capital-accounts
Then when categorizing bank statement transaction, make sure to categorize this transaction as funds contribution under your name: http://guides.manager.io/businesses/capital-accounts/funds-contributed
You can create a ledger account under current liabilities and name it Due to Director (or your name). Credit your tax refund received into your business account into the account and accordingly debit your withdrawal of the tax refund from the business account into the same ledger account. In effect, at the end of both transactions the balance on the Due to account should be zero (it’s basically an offset transaction).
Thanks guys, only just now getting a chance to read your replies, and update my account. My accountant has changed the account for my tax returns to go into, so from next year on this should be simpler