how to show bank entries of a proprietor ship which is not related to business I. e other payment and other receipts
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Quick Summary
This discussion clarifies how to handle bank transactions for a sole proprietorship that are not directly related to the business. It explains that personal withdrawals should be debited to the Drawings account and credited to the Bank account. Non-business income received into the bank can be recorded as 'Other Income' in the P&L account, or directly credited to the proprietor's capital account. The key is to maintain clear documentation and accurate entries to distinguish business and personal finances.
Is the director using the company bank account- use withdrawals accounting or petty cash accounts if the check is drawn for transport or entertainment etc. What are other receipts & payments mentioned above? txs
You can show expense which were withdrawn by the proprietor as a drawing , but you can't credit to drawings account because drawing means withdrawal from business by the proprietor . So Income which were received other than business can be shown as Other Income in P&L account under indirect Income subject to documentary evidence , but you can't credit to Drawings account .
So for Drawings you can pass entry as follows Drawing A/c Dr To Bank A/c Cr ( Being expense from business for personal use) Transfer to capital account Capital A/c Dr To Drawings A/C Cr ( Drawing transfer to capital account)
For Income you can pass entry Bank A/c Dr To Other Income A/c Cr ( Being other income credited to Bank) Transfer entry Other income A/c Dr To Profit and Loss A/c Cr ( Other income transfer)