# Transfers, owner money, and loans

Money that moves between your accounts, money that you put in or take out, and loans.

Not all money that comes into a bank account is income, and not all money that goes out is an expense.

## Transfers

A **transfer** moves money between two of your own accounts, for example from checking to savings, or from checking to a credit card. The business has the same amount of money after the transfer, so it is not income or an expense.

If you categorize a transfer as income, the income is counted, but no one paid you. IRS examiners take nontaxable deposits, such as loans and transfers, out of the total deposits before they compare deposits with income.

A credit card payment is a transfer. The expenses are the purchases on the card.

## Owner contributions and owner draws

An **owner contribution** is money that you put into the business from your own pocket. An **owner draw** is money that you take out for yourself. Both are equity, not income or an expense. For a sole proprietor, the IRS Schedule C instructions say not to include amounts paid to yourself as wages.

The IRS also tells businesses to keep the business account separate from personal accounts, and to identify the source of each deposit: business income, personal funds, or loans.

## Loans

Money that you borrow is a **loan**, not income. A loan payment has two parts: the principal, which reduces the loan, and the interest, which is an expense. Your lender's statement shows the two parts.

## In Righto

On a bank line, choose **Transfer**, or choose the Owner Contribution, Owner Draw, or loan account. When both sides of a transfer are imported, match them so that the transfer counts one time only. See [Categorize, match, and mark Done](https://rightobooks.com/help/review-transactions.md).

Other business types (for example, corporations) use different equity accounts. Ask a tax professional which accounts fit your business.

## Sources

- [Publication 583, Starting a Business and Keeping Records](https://www.irs.gov/publications/p583) (IRS)
- [Internal Revenue Manual 4.10.4, Examination of Income](https://www.irs.gov/irm/part4/irm_04-010-004) (IRS)
- [Instructions for Schedule C (Form 1040)](https://www.irs.gov/instructions/i1040sc) (IRS)