Why is it important to book private expenses correctly?
As a self-employed person or business owner, you may occasionally use your business account for private purchases – or the other way round. But if private and business expenses are not kept cleanly apart, this can cause problems in your accounts. Incorrect bookings can lead to tax disadvantages, wrong profit figures and problems during a tax audit. That's why it's important to book private expenses correctly.
1. Keep private and business expenses separate
The basic rule is: private expenses don't belong in the business accounts. So don't mix private and business payments on one account, to avoid mistakes. If it does happen, there are ways to record such expenses correctly.
2. How are private expenses booked?
How they are booked depends on whether you have a sole proprietorship or run a GmbH or AG.
Sole proprietorship
If you have a sole proprietorship, private expenses are booked as private withdrawals. Because you and your business are treated as a single unit for tax purposes, you can take money from the business account for private purposes – but you should record it cleanly via the private account in your books. These withdrawals reduce your equity but have no direct tax consequences.
How is the "Private" account kept? The Private account is used to record all private withdrawals and private contributions during the year. Typical bookings on this account are:
- Private withdrawals (e.g. private purchases with the business card)
- Private contributions (e.g. when you pay money from your private assets into the business)
Why is the "Private" account closed at the end of the year? At year-end, the Private account is closed by transferring its balance to equity. This ensures that the accounts reflect the correct business assets. As private withdrawals and contributions are neither operating income nor operating expenses, they must be kept out of the income statement. This keeps the business result correct and properly documented for tax purposes.
Example: you pay for private purchases of CHF 500 with the business credit card. This booking is recorded on the Private account and offset against your capital contributions and withdrawals at the end of the year.
GmbH or AG
With corporations such as a GmbH or AG, the separation of private and business expenses is stricter. The business assets belong to the company, not to you personally. Private expenses paid via the business account can be recorded in different ways:
- As a booking via the "current account": if, as managing director, you pay private costs from the business account, the booking is recorded as a short-term receivable from or liability to you.
- As a shareholder loan: if the private expenses are not settled in the short term, this can be treated as a loan from the company to you.
- As a hidden profit distribution: if private costs are not booked correctly and repaid, the tax office can treat this as a hidden profit distribution, which can have tax consequences.
Example: you pay your private car insurance of CHF 1'200 from the business account. The booking goes through the current account and must either be repaid or taxed as part of your salary.
3. Typical mistakes and how to avoid them
- Incorrect VAT deductions: VAT on private expenses must not be claimed as input tax.
- Unclear booking texts: every booking should be documented precisely so that it can be traced during a tax audit.
- Mixing private and business expenses: ideally, use separate accounts for business and private transactions.
Clean accounts, less stress
Booking private expenses correctly is essential to avoid tax and accounting problems. By keeping private and business expenses clearly apart and keeping clean books, you avoid mistakes and save time. That way, your accounts stay correct and you can focus fully on your business.