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The private account is a financial account used in accounting to record transactions that do not directly concern the business, but rather relate to the owner's private sphere. This account tracks withdrawals and contributions made by the owner for personal purposes; it serves to keep business and personal finances separate, avoiding confusion in the company's bookkeeping.
Withdrawals from the company by the owner
If the owner uses business funds for personal expenses, the amount is debited to the private account. The amounts withdrawn by the owner appear in the Accounts table, in the Income column of the private account, because they represent a receivable of the company from the owner. In the Balance column of the private account, the amount is positive.
Deposits into the company by the owner
If the owner deposits private funds into business accounts, the amount is credited to the private account. The amounts deposited by the owner appear in the Accounts table, in the Expenses column of the private account, because they represent a liability of the company to the owner. In the Balance column of the private account, the amount is negative.
Balance of the private/partner account
- Positive balance: indicates that the owner owes money to the company.
- Negative balance: indicates that the company owes money to the owner.