What are the advantages of doing accounting on your personal finances?
In my opinion, every person, regardless of his or her situation, should be keeping track of their personal finances.  In addition, I believe that everyone, regardless of their situation, should have some sort of budget/spending plan. For many people, it is tempting to ignore the details of their finances and not worry about it.  After all, the bank knows how much money I have, right?  I get a statement from them each month that shows what I have spent, and I can always go to the bank's website and find out how much money I have, right?  Unfortunately, this type of thinking can lead to several different problems. Overspending.  In olden days, it was difficult to spend more money than you had.  Most purchases were made in cash, so if your wallet had cash in it, you could spend it, and when your wallet was empty, you were required to stop spending.  In this age of credit and electronic transactions, this is no longer the case.  It is extremely easy to spend money that you don't yet have, and find yourself in debt.  Debt, of course, leads to interest charges and future burdens. Unpreparedness for the future.  Without a plan, it is difficult to know if you have saved up enough for large future expenses.  Will you have enough money to pay the water bill that only shows up once every three months or the property tax bill that only shows up once a year?  Will you have enough money to pay to fix your car when it breaks?  Will you have enough money to replace your car when it is time?  How about helping out your kids with college tuition, or funding your retirement?  Without a plan, all of these are very difficult to manage without proper accounting.   Anxiety.  Not having a clear picture of your finances can lead to anxiety.  This can happen whether or not you are actually overspending, and whether or not you have enough saved up to cover future expenses, because you simply don't know if you have adequately covered your situation or not.  Making a plan and doing the accounting necessary to ensure you are following your plan can take the worry out of your finances. Fear of spending.  There was an interesting question from a user last year who was not at all in trouble with his finances, yet was always afraid to spend any money, because he didn't have a budget/spending plan in place.  If you spend money on a vacation, are you putting your property tax bill in jeopardy?  With a good budget in place, you can know for sure whether or not you will have enough money to pay your future expenses and can spend on something else today. This can all be done with or without the aid of software, but like many things, a computer makes the job easier.  A good personal finance program will do two things: Keeps track of your spending and balances, apart from your bank.  The bank can only show you things that have cleared the bank.  If you set up future payments (outside of the bank), or you write a check that has not been cashed yet, or you spend money on a credit card and have not paid the bill yet, these will not be reflected in your bank balance online.  However, if you manually enter these things into your own personal finance program, you can see how much money you actually have available to spend. Lets you plan for future spending.  The spending plan, or budget, lets you assign a job to every dollar that you own.  By doing this, you won't spend rent money at the bar, and you won't spend the car insurance money on a vacation. I've written before about the details on how some of these software packages work.  To answer your question about double-entry accounting: Some software packages do use true double-entry accounting (GnuCash, Ledger) and some do not (YNAB, EveryDollar, Mvelopes).  In my opinion, double-entry accounting is an unnecessary complication for personal finances.  If you don't already know what double-entry accounting is, stick with one of the simpler solutions. Everyone should keep track of what they spend. When you see how much you are spending on each category of expense, you can make good decisions about how much your life is improved by something vs. how much you spend on that thing.  Everyone makes better decisions when they are informed by accurate information about those decisions. There's no reason why personal finances are different from any other decision you make in life. This remains true whether you make very little or very much. Some people define rich as being able to live on less money than you earn. I recently made the switch to keeping track of my finance (Because I found an app that does almost everything for me). Before, my situation was fairly simple: I was unable to come up with a clear picture of how much I was spending vs saving (altho I had a rough idea). Now I here is what it changes: What I can do now: Is it useful ? Since I don't actually need to save more than I do (I am already saving 60-75% of my income), 1) isn't important. Since I don't have any visibility on my personal situation within a few years, 2) and 3) are not important. Conclusion: Since I don't actually spend any time building theses informations I am happy to use this app. It's kind of fun. If I did'nt had that tool... It would be a waste of time for me. Depends on your situation ? Nb: the app is Moneytree. Works only in Japan.
"If you are wanting to teach your kids basic accounting principles there is some good stuff on Khan Academy. However most of the stuff takes practice to really make it hit home and its kinda boring (Especially to kids who may or may not care about it). Maybe if you help them set up an account on Mint so that they are at least aware of their finances. Think it also has a heap of videos you can watch that teaches basic personal finance. If you actually want them to understand the techniques and methods behind creating & maintaining a personal ledger/journal and reconciling it against a bank account you are getting into what undergraduates study and there are plenty of first year textbooks around. Look around for a second hand one that is a few revisions old and they are usually dirt cheap (I scored one for only a dollar not that long ago). I feel like the mindset is what matters most. Journals and all that jazz are easy if you have the right mindset. That is something that you really have to demonstrate to your children rather than teach. Meaning you yourself keeping your finances in order and showing them how you organise and file your bills/ credit cards etc. (So they learn the importance of keeping financial records; meaning in the future when its talked about it doesn't fall on deaf ears) Emphasize the whole ""living within your means"" because even if they don't understand bookkeeping or learn anything else at least their finances won't turn out too bad." "As your financial situation becomes more complex, it becomes increasingly more difficult to keep track of everything with a simple spreadsheet.  It is much easier to work with software that is specifically designed for personal finances. A good program will allow you to keep track of as many accounts as you want.  A great program will completely separate the different account balances (location of the money) from the budget category balances (purpose of the money).  Let me explain: When you set up the software, you will enter in all of your different bank accounts with their balances.  Perhaps you have three savings accounts and two checking accounts.  It doesn't matter.  When you are done entering those, the software will total them up, and the next job you have is assigning this money into different budget categories: your spending plan.  For example, you might put some of it into a grocery category, some into an entertainment category, some will be assigned to pay your next car insurance bill, and some will be an emergency fund.  (These categories are completely customizable, and your budget can be as broad or as detailed as you wish.)  When you deposit your paycheck, you assign that new income into budget categories as well.  It doesn't matter at this point which accounts your money are located in; the only thing that matters is that you own this money and you have access to it.  Now, you might want to use a certain account for a certain budget category, but you are not required to do so.  (For example, your grocery category money will probably be in your checking account, since you will be spending from it regularly.  Your emergency fund will hopefully be in an account that earns a little higher interest.) Once you take this approach, you might find you don't need as many bank accounts as you thought you did, because the software does the job of separating your money into different ""accounts"" for different purposes. I've written before about the different categories of personal finance software.  YNAB, Mvelopes, and EveryDollar are three examples of software that will take this approach of separating the concepts of the bank account and the budget category." "Unfortunately I don't think any of the online personal finance applications will do what you're asking. Most (if not all) online person finance software uses a combination of partnerships with the banks themselves and ""screen scraping"" to import your data. This simplifies things for the user but is typically limited to whenever the service was activated. Online personal finance software is still relatively young and doesn't offer the depth available in a desktop application (yet). If you are unwilling to part with historical data you spent years accumulating you are better off with a desktop application. Online Personal Finance Software Pros Cons Desktop Personal Finance Software Pros Cons In my humble opinion the personal finance software industry really needs a hybrid approach. A desktop application that is synchronized with a website. Offering the stability and tools of a desktop application with the availability of a web application." "Should is a very ""strong"" word. You do what makes most sense to you. Should I be making a single account for Person and crediting / debiting that account? You can do that. Should I be creating a loan for Person? And if so, would I make a new   loan each month or would I keep all of the loans in one account? You can create a loan account (your asset), you don't need to create a new account every time - just change the balance of the existing one. That's essentially the implementation of the first way (""making a single account for a Person""). How do I show the money moving from my checking account to Company and   then to Person's loan? You make the payment to Company from your Checking, and you adjust the loan amount to Person from Equity for the same amount. When the Person pays - you clear the loan balance and adjust the Checking balance accordingly. This keeps your balance intact for the whole time (i.e.: your total balance sheet doesn't change, money moves from line to line internally but the totals remain the same). This is the proper trail you're looking for. How do I (or should I even) show the money being reimbursed from the   expense? You shouldn't. Company is your expense. Payment by the Person is your income. They net out to zero (unless you charge interest). Do I debit the expense at any point? Of course. Company is your expense account. Should I not concern myself with the source of a loan / repayment and   instead just increase the size of the loan? Yes. See above." "I am perfectly qualified to not use an accountant.  I am a business professor, and my work crosses over into accounting quite a bit.  I would certainly find a CPA that is reputable and hire them for advice before starting.  I know a physicist who didn't do that and found they ended up with $78,000 in fines.  There are a number of specific things an accountant might provide that Quickbooks will not.  First and foremost, they are an outsider's set of eyes.  If they are good, they will find a polite way to say ""you want to do what?!?!?!""  If they are good, they won't fall out of their chair, their jaw won't drop to the floor, and they won't giggle until they get home. A good accountant has seen around a hundred successful and unsuccessful businesses.  They have seen everything you may have thought of.  Intelligence is learning from your own mistakes, wisdom is learning from the mistakes of others.  Accountants are the repositories of wisdom. An accountant can point out weaknesses in your plan and help you shore it up.  They can provide information about the local market that you may not be aware of.  They can assist you with understanding the long run consequences of the legal form that you choose.  They can assist you in understanding the trade-offs of different funding models.  They can also do tasks that you are not talented at and which will take a lot of time if you do it, and little time if they do it. There is a reason that accountants are required to have 160 semester hours to sit for the CPA.  They also have to have a few thousand field hours before they can sit for it as well. There is one thing you may want to keep in mind though.  An accountant will often do what you ask them to do, so think about what you want before you visit the accountant.  Also, remember to ask the question ""is there a question I should have asked but didn't?""" Does the friend fix your electrical wiring and the engine of your car? If you need a professional advice - ask a professional. In this case - an accountant (not necessarily a CPA, but at least an experienced bookkeeper). Financial Statements (official documents, that is) must be signed by a public accountant (CPA in the US) or the principle (you). I wouldn't take chances and would definitely have an accountant do that. You need to consider the asset useful life, and the depreciation. The fact that you use it for non-business purposes may be recorded in various ways. One that comes to mind is accounting as a supplement for depreciation: You depreciate the percentage that is used for business, and record as a distribution to owner the rest (which is accounting for the personal use). This way it would also match the tax reporting (in the US, at least). Bottom line: if you're preparing an official financial statement (that you're going to submit to anyone other than yourself) - get a professional advice. Are you allowed to have two personal current accounts with a debit card attached to each one? Yes, you may have as many current accounts you want, but you should ask why should I have more than one. It is cumbersome and time consuming to keep track of ongoing incoming credits and outgoing debits. Open to bank fraud too, if you aren't careful. If yes, can a sole trader in the UK use the second personal account for business transactions? Yes, but no payments to the business. At the end of the year you file you P11D, even if you have a business bank account. You would need to justify the expenses by keeping the bills and stuff. As it will be a personal account, you have to little more careful, not to mix personal and business expenses.  If you are allowed to use a second personal account for business transactions, then why would someone choose to open a business bank account, where you have to pay? What are the benefits? First of all no company will pay into you personal account, for any transactions, they need to pay you. They will only pay to an account registered with the business, with whom they are dealing with. Benefits are you have your business expenses sorted out in one account and personal expenses in other. Pure business expenses comes out of the business account, rather than from your personal purse, keeps the accounts smooth. No need to sort out expenses at the end of each quarter or at the end of each month. The biggest advantage to small business owners paid in cash is not that it might save the 2 or 3 percent that would go to the credit card company.  The biggest advantage is that they have the opportunity to keep the transaction entirely off the books and pocket the cash without paying income tax or sales tax, especially when no receipt is given, or when it's a service instead of a product being sold, or when it's an approximately-tracked inventory unit going out the door.  Although it's illegal, it's widely done, and it's also often a temptation for employees to try and get away with doing it too.