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  #1  
Old 07-18-2017, 03:32 PM
pondwire pondwire is offline
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Account Type when Transferring Funds from Savings

Hello All,

This is probably a very simple question, but I still need guidance. When my business transfers funds from a separate savings account into the business checking account, what kind of account type is this?

I've created an account for this purpose and called the account, "Transfer of Funds" and it is of type Bank with payee always being Sync for QuickBooks Deposit. (Sales made at our business are processed through an online payment gateway and synced with QuickBooks, thus the name of this account.) Having the Transfer of Funds account be a Bank type account results in a constant and increasing negative balance. Is that normal? Have I chosen the correct account type for transfers of funds into our business account? Thank you for any suggestions.
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Old 07-18-2017, 09:30 PM
Lorin Browning Lorin Browning is offline
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It is a credit entry to the account from which the funds are withdrawn, and a debit entry to the account to which the funds are being deposited.
You are concerned with transferring funds between two general ledger asset accounts, both of which are in the Bank section of your chart of accounts. You don't need (and shouldn't have to use) a third account, the Transfer of Funds Account, to record the transfer.

Just use a General Journal entry with a debit entry to the general ledger account receiving the funds and a credit entry to the general ledger account from which the funds are withdrawn.

To illustrate: Suppose two general ledger (bank) asset accounts:
  • 1010 First Citizens Bank ((Business Checking)
  • 1020 State Credit Union (Business Savings)

To record the transfer of $500 from the State Credit Union account to the First Citizens account, the general journal entry would be:
  • 1010 First Citizens, debit $500
  • 1020 State Credit Union, credit $500

Since the transaction is between two Balance Sheet accounts, the transaction does not affect the Profit and Loss at all.

Unless an bank-type account is overdrawn, it will always have a debit balance. If your savings account becomes overdrawn (a credit balance), then it is more than likely you are not correctly recording deposits to that account.
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Lorin Browning, Ph. D.
Fellow -- National Tax Practice Institute
lorin@lorinbrowning.com

Last edited by Lorin Browning; 07-18-2017 at 09:52 PM.
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  #3  
Old 08-07-2017, 06:18 PM
pondwire pondwire is offline
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Thank you for your detailed reply! It makes sense now...
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