# Applying the fundamental account theory - complications

## Complexity I - Self employment and business expenses

If we have a business keeping records with this model, expenses go from our wealth containers into the business and business income goes from the business into our wealth containers. Business accounts are one kind of account that is likely to regularly have transactions in both directions. Consider the following business records:

Date Description Value From To
2017-06-02 Bought materials $1000 checking account business 2017-06-04 Rent on warehouse space$1500 checking account business
2017-06-05 Customer 1 - small sale $200 business checking account 2017-06-06 Electric bill - warehouse$450 credit card business
2017-06-12 Customer 2 - big sale $3000 business checking account If we look at the business account, if we are making money, more money will leave the business (and go to our bank account) than will enter the business (in the form of expenses we pay for). Business 2017-06-02 Bought materials$1000
2017-06-04 Rent on warehouse space $1500 2017-06-05 Customer 1 - small sale -$200
2017-06-06 Electric bill - warehouse $450 2017-06-12 Customer 2 - big sale -$3000
Total-$250 ## Complexity II - Lending and borrowing money When you lend or borrow money and expect the account to be ongoing for multiple years, you should designate a separate account. For example, I lend money to my employer all the time on a short term basis because I put company expenses on my credit card (and I am reimbursed 10-60 days later). In accounting this is handled as follows: Date Description Value From To 2015-06-01 Bought employer supplies 1$250 credit card emp-loan
2015-06-03 Bought employer supplies 2 $140 credit card emp-loan 2015-06-10 Bought employer supplies 3$530 credit card emp-loan
2015-06-20 Bought employer supplies 4 $260 credit card emp-loan 2015-06-20 Employer reimbursement$1180 emp-loan checking account

When we compute the balance on the employer loan account (a wealth container), we see exactly what is owed.

Employer Loans
2015-06-01 Bought employer supplies 1 $250 2015-06-03 Bought employer supplies 2$140
2015-06-10 Bought employer supplies 3 $530 2015-06-20 Bought employer supplies 4$260
2015-06-20 Employer reimbursement -$1180 Total$0