The scenario is: a sole proprietor is having income under the heads of PGBP, Salary and Other Sources.
While using a web-based financial accounting software such as Zoho Books, it gives an option to categorize imported bank transactions for the ease of accounting, tracking and report generation.
For the ease of preparation of income tax returns, I would like to know if it is an acceptable accounting practice to categorize various banking transactions like below.
Is it alright to categorize non-business income (such as Salary and Other Sources) into various sub-accounts under the Equity section of the Balance Sheet, like "Salary", "Interest Income from Savings Account", "Interest Income from Bank Deposits", etc.?
Similarly, for non-business expenditure such as personal expenditure and disallowed expenditure (as mentioned in section 38, section 40, etc.), is it alright to categorize these expense transactions (a fair proportionate "personal use" part of an expense, if applicable) into various sub-accounts (contra Equity accounts) under the Equity / Owner's Drawings account?
Thank you in advance for any constructive input.
PS: I do not have a commerce background. Hence these questions!
CAclubindia
