Why is it important to correctly record private expenditure?
As a self-employed person or entrepreneur, you may also occasionally use your business account for private purchases — or vice versa. But this can lead to problems in accounting if private and business expenses are not properly separated. Incorrect postings can result in tax disadvantages, incorrect profit calculations and problems during a tax audit. It is therefore important to correctly account for private expenditure.
1. Separate private expenditure from business expenditure
In principle, the following applies: Private expenditure does not belong in business accounting. Therefore, do not mix private and business payments in one account to avoid mistakes. If it does happen, there are ways to correctly record such expenditure.
2. How is private expenditure accounted for?
The type of booking depends on whether you have a sole proprietorship Have or a GmbH or AG leads.
sole proprietorship
If you have a sole proprietorship, private expenses are considered as private withdrawals accounted for. Since you and your company are considered one unit for tax purposes, you can withdraw money from the business account for private purposes, but should record this cleanly in the accounting department via the private account. These withdrawals reduce your equity but have no direct tax consequences.
How is the “Private” account managed? The account private is used to record all private withdrawals and private deposits during the year. Typical transactions on this account include:
- private withdrawals (e.g. private purchases with a business card)
- private deposits (e.g. when you deposit money from your private assets into the company)
Why is the “Private” account closed at the end of the year? The account private is resolved at the end of the year by offsetting the balance against equity. This ensures that accounting reflects the correct business assets. Since private withdrawals and deposits do not represent operating income or expenses, they must be removed from the income statement. In this way, the business results remain accurate and properly documented for tax purposes.
example: You pay for private purchases in the amount of CHF 500 with a business credit card. This booking is credited to the account private recorded and offset against your capital deposits/withdrawals at the end of the year.
GmbH or AG
In the case of corporations such as a GmbH or AG, the separation of private and business expenses is stricter. The business assets belong to society and not to you personally. Private expenses made via the business account can be recorded in various ways:
- As a booking via the “Current Account” account: If you, as managing director, pay private costs via the business account, the booking will be recorded as a short-term claim or liability to you.
- As a shareholder loan: If private expenses are not settled in the short term, this can be regarded as a loan from the company to you.
- As a hidden profit distribution: If private costs are not correctly recorded and repaid, the tax office can interpret this as a hidden distribution of profits, which can have tax consequences.
example: You pay your private car insurance in the amount of CHF 1,200 via your business account. The booking is made via Current account and must either be repaid or taxed as part of the salary.
3. Typical mistakes and how to avoid them
- Erroneous VAT deductions: VAT on private expenditure may not be claimed as input tax.
- Unclear booking texts: Each booking should be precisely documented so that it remains comprehensible during a tax audit.
- Mixing private and business expenditure: Ideally, use separate accounts for business and personal transactions.
Clean accounting, less stress
The correct accounting of private expenditure is essential to avoid tax and accounting problems. By clearly separating private and business expenses and keeping accounts clean, you can avoid mistakes and save time. This keeps your accounting correct and allows you to fully concentrate on your business.
