Separate books (or funds) represent entirely different financial entities, or “companies.” So moving money between them requires certain steps.
» To interpret the transfer as a loan:
Granting the money:
- Giving Fund—Write a check or other payment type to the Receiving Fund using a liability account.
- Receiving Fund—Deposit the money into a liability account.
Paying it back:
- Receiving Fund—Send payments to Giving fund by writing check using the liability account.
- Giving Fund—Received payment by depositing into a liability account.
» To interpret the transfer as a gift:
- Giving Fund—Write check to Receiving Fund using an expense account.
- Receiving Fund—Deposit money into an income account.