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How to split a bank transaction between two categories

This article explains how to break down a bank transaction that needs to be explained partly into one category and partly into another.

For example, a single purchase may include box files that need to be explained to ‘Stationery’ and a book of stamps that needs to be explained to ‘Postage’.

If you're registered for VAT, it’s important to allocate the relevant amount to each category and apply the appropriate VAT rates if they differ between the categories. If both the categories you'll be using have VAT on them, then you need to apportion the VAT between them. If only one category has VAT then all the VAT on the receipt would go into that category.

Once the relevant bank transaction has been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you will need to explain it using the appropriate ‘Type’ and ‘Category’ as detailed below.

Please note that you’ll need to have level 6 access or above to your FreeAgent account to explain bank transactions.

1. Navigate to the relevant bank transaction

Begin by navigating to the 'Banking' tab at the top of the screen and select 'Bank Accounts' from the drop-down menu.

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Choose the relevant bank account from the list.

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Select the transaction that you would like to explain.

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2. Split the bank transaction

Next, you will need to split the bank transaction into the relevant amounts for each category.

To do this, select ‘More Options’ in the bottom-right corner. Alternatively, you can press the 'Alt' key or ‘Option’ key, depending on your device, at the same time as selecting a bank transaction to open ‘More Options’.

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Enter the amount that you would like to allocate to the first category in the ‘Value’ field and select the appropriate VAT rate using the ‘VAT’ drop-down menu. To allocate a certain amount of VAT to the transaction, select ‘Amount’ from the ‘VAT’ drop-down menu and enter the appropriate amount.

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Select the relevant category to allocate this amount to using the ‘Category’ drop-down menu and enter a description to help you identify what the transaction relates to.

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Select ‘Create New Explanation’ at the bottom of the screen to explain the amount to the first category.

3. Explain the remaining balance

Next, you will need to explain and categorise the remaining balance of the bank transaction. You will notice that FreeAgent has created a new transaction for the remaining amount to be explained. In the above example, we’ve explained £15 of the original £30, so FreeAgent has created a new transaction for the remaining £15.

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To explain the remaining balance between multiple categories, select the new transaction, select ‘More Options’ and follow the steps above to split the transaction again.

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To explain the remaining balance to a single category, select the new transaction, then select the relevant type from the ‘Type’ drop-down menu and select the relevant VAT rate from the ‘Including’ drop-down menu. To allocate a certain amount of VAT to the transaction, select ‘Amount’ from the ‘VAT’ drop-down menu and enter the appropriate amount.

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Select the relevant category to allocate the remaining balance to using the ‘Category’ drop-down menu and enter a description to identify what the transaction relates to.

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Select ‘Explain Transaction’ to complete the process and split the value of the bank transaction between two categories.

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A record of the bank transactions having been explained will appear in your Audit Trail report.

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