When recording all business transactions, don’t forget to include personal information. What exactly is personal information?
This is one of the important expenses to note if you don’t want to lose profits while running a business.
The following is a more complete explanation, including characteristics, recording purposes, and tips for managing it.
What is Prive?
In the world of accounting, a transaction is recorded as private when the financial transaction is carried out by the business owner for personal interests, not for business interests.
So, to explain what private equity is, it’s the withdrawal of a portion of a business’s capital or assets. As mentioned, the purpose of this withdrawal is for the owner’s personal needs.
The form of personal income can be in the form of withdrawing cash from a business account for personal expenses, using company assets for personal interests, or even purchasing goods or services for personal use with company money.
Purpose of Private Recording
1. To Keep Personal and Business Finances Separate
By keeping personal records, owners can clearly separate personal finances and business finances.
This will of course make financial analysis and planning easier for both of them.
2. To ensure accurate financial reports
Terkait dengan poin sebelumnya, mencatat penggunaan modal atau aset perusahaan untuk kepentingan pribadi akan memastikan laporan keuangan bisnis tercatat dengan akurat.
So, if you’re still wondering what the main purpose of recording personal transactions is, the answer is to prevent personal and business transactions from intermingling. This is crucial for maintaining business accountability and financial stability.
3. Business Owners’ Personal Expenses Are Better Monitored
By keeping personal records, this allows business owners to always monitor their personal expenses, which are separate from business finances.
This method will really help the owner to make a better personal budget so that they can manage their personal finances more effectively.
4. Monitor Business Performance More Accurately
Imagine, without private records, reported profits could appear higher than they actually are. In fact, there’s capital or assets already taken by the owner, but they’re not recorded.
This can of course lead to misunderstandings about the true financial health of the business.
5. Avoid Legal and Tax Problems
Although it may seem insignificant, using company assets for personal gain without proper record keeping can lead to legal and tax problems.
So, with proper private record keeping, you will avoid legal and tax problems.
What are the characteristics of Prive?
1. Not an Expense Account in Business
One characteristic of private is that it’s not included in an expense account, even though it actually reduces the business’s total funds.
Why? This is because withdrawals made by the owner are not considered business expenses. These expenses are simply a reduction in the amount of business equity used for personal purposes.
2. Not a Permanent or Continuous Account
Apart from not being an expense account, private is also not an account that is recorded permanently or continuously.
This means that in the year-end financial records, there will be a balance in the general ledger with a credit. The remaining balance will be recorded on the owner’s equity side of the balance sheet with a debit or capital transfer.
So, this private account is only used in the following year for the purpose of tracking business activity withdrawals in the previous year.
3. Track Capital Used for Personal Needs
With a private account, you can track the total capital or funds that have been withdrawn from business capital for personal needs.
This makes it easier to monitor withdrawals by business owners. Furthermore, the company’s total capital balance is more secure and aligns with recorded cash flow.
Tips for Managing Private
1. Set or Create Boundaries
The main thing to pay attention to when managing private funds, whether for business owners or investors, is to determine or create limits on the company’s private transactions.
For example, private equity should not be more than 50% of the existing initial capital with the aim of ensuring that the company’s financial stability is not disturbed.
2. Prepare a Reserve Fund
Because a company’s finances can be disrupted if its capital owners suddenly withdraw their capital, an emergency fund must be established. Its purpose is to serve as a backup to cover unforeseen needs.
For example, by taking from retained earnings rather than taking from capital.
3. Don’t Withdraw More Than Profit
You should establish rules regarding private withdrawals. Ensure the amount is less than or equal to the profit earned.
Because profits must always be monitored for increases or decreases in each period, it is necessary to set limits on capital or asset withdrawals so that they do not exceed the amount of profit.
4. Separate Personal and Business Finances
When managing personal finances, there’s one important thing to keep in mind. That’s keeping personal finances and matters separate from the company.
Cara melakukannya adalah dengan membuat peraturan kepada para pemilik modal, termasuk diri sendiri, agar tidak terlalu banyak menarik modal hanya untuk memenuhi gaya hidup.
5. Don’t Forget to Evaluate
Tips terakhir saat mengelola prive adalah jangan lupa untuk melakukan evaluasi secara rutin.
With an evaluation, you can determine whether there has been a decrease or increase in business capital or assets. Furthermore, you can also see the extent of private transactions.
Itulah penjelasan mengenai apa itu prive, serta karakteristik dan tips mengelolanya. Jika kamu membutuhkan bantuan dalam mengelola keuangan bisnis, kamu bisa mendapatkannya di aplikasi Labamu.
There are various features here to maximize your business potential, such as the Report feature to monitor business activities comprehensively or the Accounts Payable Book to manage finances more efficiently.
So, download the Labamu app now on Google Play or the App Store to get the help you need in your business!
