Hello. I have an issue causing me some confusion that i'd really appreciate some insight into. Unfortunately, i've only just in the last few months had a separate account for my wellness services business (wish i'd done that from the beginning). I mostly ironed out the discrepancies in the data when i opened my Zoho Books account, by using the Opening Balances function. But now one particular transaction has come back to haunt me...
I received a deposit way back in June for a service that was due to be delivered in January. This went into my personal account, as i hadn't yet opened the business account. I've just refunded that deposit as i've had to cancel the service, and i sent the refund from my business account.
I've recorded this as a transfer between the business account and my personal account. This seems to make logical sense, as if i had refunded the amount from my personal account, i would have needed to pay myself back from the business account. What's preventing me from feeling more confident about this solution is the fact that the original deposit i received in June was accounted for in my Opening Balance in Zoho. I'm thinking that this must mean the original amount that i received into my personal account had already been 'transferred' from that account to the business account when i started with the Opening Balance - so am i in fact paying myself back incorrectly? Recording the refund in this way has obviously increased the balance of my personal account within Zoho, but should it perhaps have affected the Opening Balance instead (not sure whether that's even possible/desirable)?
I'd really appreciate it if someone could tell me whether i've recorded this correctly. Many thanks for your attention.
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I’m not sure whether you’re trying to manage your affairs without an accountant but, if so, I think your question demonstrates why taking paid for professional advice might be to your advantage.
You took the money? Should have opened the box!
Could you perhaps elaborate, using actual amounts and dates and details of any invoices / credit notes raised.
So you received a deposit personally. That's Dr Drawings, Cr creditors. Then you refunded it from the business account, that should be Dr creditors, Cr bank, but you've entered it as Dr drawings, Cr bank, leaving a balance in creditors and you with twice as much drawings as you actually got.
I'msorryIhaven'taclue wrote:You took the money? Should have opened the box!
I'm not sure what this means...
Well, Take your Pick.
,p.I was hoping that if anyone ever wanted me to explain the balance in the proper accounts at the time of opening (reflected in the Opening Balance in Zoho and in the balance of the account I created for my personal bank account on that system), I could refer them to the basic list of transactions I was keeping before that point. If there's a need to go back and retrospectively create a full set of accounts for before that point, so be it, but obviously I'd rather avoid that if at all possible.
Why is your personal bank account in the business records? Business stuff goes in the business books, personal stuff does not. It's not a business asset or business liability so shouldn't be on the business balance sheet. You must have covered this by level 2 AAT.
I had assumed when you said the deposit was in your opening balance you meant creditor balance.
Essentially then what has happened is you received a deposit from a customer in your personal account and refunded it out of your business account. The refund is drawings, the deposit is nothing and shouldn't appear anywhere and you should take your personal account out of your records entirely.
msbk wrote: ,p.I was hoping that if anyone ever wanted me to explain the balance in the proper accounts at the time of opening (reflected in the Opening Balance in Zoho and in the balance of the account I created for my personal bank account on that system), I could refer them to the basic list of transactions I was keeping before that point. If there's a need to go back and retrospectively create a full set of accounts for before that point, so be it, but obviously I'd rather avoid that if at all possible.
Why is your personal bank account in the business records? Business stuff goes in the business books, personal stuff does not. It's not a business asset or business liability so shouldn't be on the business balance sheet. You must have covered this by level 2 AAT.
I had assumed when you said the deposit was in your opening balance you meant creditor balance.
Essentially then what has happened is you received a deposit from a customer in your personal account and refunded it out of your business account. The refund is drawings, the deposit is nothing and shouldn't appear anywhere and you should take your personal account out of your records entirely.
To be fair, Duggi, the OP says he was using his personal account at the outset and regrets it.
You cannot have clients after only level 2 AAT.
You may say you are practising on yourself but who is checking your work?
All prof bodies have strict guidelines you should be following and they can fine you/penalise you in other ways for breaching their rules.
All ok just to do your own books, but having your PII etc is a seriously worrying situation, you are not ready to practise on clients!
How do you treat deposits in your accounts?
Follow the money.
You received money from a client into your personal account (for reasons given). Your business at this point is unaware. You then refund this money from the business, which notwithstanding later actions it did not receive. Regardless of where you “posted” this to your business did not have the original funds so needs to receive it. At this point paying the money from personal funds into your business account would achieve this.
Now to the opening balances. You say the deposit is in these opening balances. But where? These balances should have related to the full balance sheet as at that date. The “deposit” should have been shown as a liability (credit balance). Thus when you repaid it the balance will clear. Its opposite entry would be in bank, but only if at some prior point you had paid it into the business bank account, otherwise you would have needed a debit entry to reflect the fact that you owed the business the money. Remember you should be able to reconcile your bank account to your bank statement and must “correct” any reconciled amount soonish.
Review your actual bank entries - personal and business for this and then review the composition of your opening balances. The answer will be there.
Hope this helps.
So the deposit happened prior to your opening balance then clearly there's a missing double entry.