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wally11
Level 1

How to categorize client payments that were sent to my personal bank account as an s-corp?

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4 Comments
Teri
Level 9

How to categorize client payments that were sent to my personal bank account as an s-corp?

I had a few of these when I first started my S-Corp, some I just deposited in business account and was no problem.  If they are already in your personal bank account, you can write check to business  and deposit there then apply payment to your open invoices is probably the easiest way to correct. 

wally11
Level 1

How to categorize client payments that were sent to my personal bank account as an s-corp?

I see. How would you go about it if you wanted to keep your money at the personal bank? I receive a much higher interest rate in my account and I don't have all of the funds to deposit back into my business account.

Rustler
Level 15

How to categorize client payments that were sent to my personal bank account as an s-corp?


@wally11 wrote:

I see. How would you go about it if you wanted to keep your money at the personal bank? I receive a much higher interest rate in my account and I don't have all of the funds to deposit back into my business account.


An s-corp does not have an equity drawing account so you really can not just keep the funds in your personal account with out creating a due in in the s-corp.

 

Receive the payment in the s-corp books.

create an asset account called due from [name]

write a check, change the check number to eft, do not print the check this is data entry, and select the due from account as the expense (reason) for the check

Later you need to repay the full amount to the s-corp

Teri
Level 9

How to categorize client payments that were sent to my personal bank account as an s-corp?

As an S-Corp, I set up two accounts in Equity section of Balance sheet: 

 

3100 - Equity Investments - Personal money paid for company expense

3200 - Equity Distributions - Business money I take out for personal use

 

3100 is where I code home office rent, DR Rent expense and CR 3100

3200 is where I code payment of personal income taxes, DR 3200 and CR Cash

 

I do not bother to write checks between me and my company since it is all my money. 

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Since I know I must keep biz and personal separate, but I also know I have transactions between my biz and personal accounts, I set up these two accounts to avoid writing checks to myself which I see as a waste of time because I understand the end result and requirements. 

 

For example, which has happened, I get a tax refund check that my bookkeeper deposits into the wrong bank account (biz vs. personal).

 

If tax refund is personal money but deposit goes into biz account which is DR Cash, I would CR  3100, since I have essentially put my personal money into biz, same as if I had invested in biz.

 

If tax refund is biz (like Franchise Tax) but deposit goes into personal account, on my books, I would CR Franchise Tax account and DR 3200, because I have now taken as personal money. 

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This last example is the situation this person has.  So if he had these accounts setup, could use. 

He has biz money deposited into personal bank account so if he wants to keep in there, must record as a Distribution of company profit/equity.

 

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