Starting and growing a small business takes not just hard work, but money too. Throughout your business's life, there may be times where you yourself have to invest in the business. (Spend money to make money, right?) That said, properly tracking money that you invest into and take out of your business is critical. Here's quick look at how you do just that in Kashoo.
Tracking Your Personal Investment In Your Business
When it comes to tracking personal investment in your business, you'll want to have a few things in place, namely, accounting software and an organized chart of accounts. In this chart of accounts, you'll want to create a contributed capital account and an owner's draw account. When you put personal funds into your business (i.e., a deposit into the business bank account or to cover a business expense) that money would "come from" the contributed capital account. Similiarly, when you need to personally pull money out of the business, you would do this from the owner's draw account. These transactions can typically be offset against personal income you have received from the company and thus potentially lower your personal tax obligation. (As always, discuss subjects like this one with your accountant or tax prep pro because bestowers of tax advice Kashoo is not.)
The key to successfully tracking the money you put into (and take out of) your business is accuracy. When you're accurate, you are best positioning yourself and the business for all of the appropriate write-offs. Accuracy is most often missed when it comes to expenses: when you, the business owner, makes a business expense purchase with personal funds and don't record it. Little expenses here and there can add up! (Side note: there's a great small business accounting app that can help with stuff like this.)