Explain money paid out of your bank account

This article explains the different options that you can choose from when explaining bank transactions going out of your business bank account in FreeAgent.

Read more on the different options that are available when explaining a bank transaction coming in to your bank account.

Once the relevant bank transaction has been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you'll need to explain it using the appropriate ‘Type’ and ‘Category’. You’ll need to have level 6 access or above to your FreeAgent account to explain bank transactions.

Read on to find out how to explain money paid out of your bank account. Alternatively, watch the video below.

Explaining money paid out of your business bank account

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

Choose the relevant bank account from the list of accounts.

When explaining bank transactions or entering bank transactions manually, you need to select a transaction ‘Type’. You can choose between:

• ‘Sales Refund’
• ‘Payment’
• ‘Bill Payment’
• ‘Transfer to Another Account’
• ‘Money Paid to User’
• ‘Purchase of Capital Asset’
• ‘Purchase of Stock’
• 'Credit Note Refund’
• ‘Other Money Out’

You can find more details about each of these transaction types below.

Sales refund

Select ‘Sales Refund’ as the transaction ‘Type’ if the transaction relates to money that you’re refunding to a customer for cash previously received and explained as ‘Sales’. Please note that you won't see this option if you have an unincorporated landlord account.

Select the appropriate rate of Sales Tax and select ‘Explain transaction’ to complete the process.

Payment

Select ‘Payment’ as the transaction ‘Type’ if the transaction relates to a cost that isn't paying off a bill that you've entered into FreeAgent or money paid to a user in FreeAgent.

Select the relevant cost category from the ‘Category’ drop-down menu, such as an admin expense and cost of sales. You can create custom categories if you need to.

Once you’ve chosen the relevant category, select ‘Explain transaction’ to complete the process. Read more on how to categorise a business cost.

Bill payment

Select ‘Bill Payment’ as the transaction ‘Type’ if the transaction relates to a payment for a bill that you’ve created in FreeAgent.

Select the relevant bill from the ‘Bill’ drop-down menu and select ‘Explain transaction’ to complete the process. Read more on how to mark a bill as paid.

Transfer to another account

Select ‘Transfer to Another Account’ if the transaction relates to money being transferred to another bank account that you’ve set up in FreeAgent.

Next, select the relevant bank account from the ‘Bank Account’ drop-down menu and select ‘Explain transaction’ to complete the process. Read more on how to record the transfer of funds between bank accounts in FreeAgent.

Money paid to user

Select ‘Money Paid to User’ as the transaction ‘Type’ if the transaction relates to money paid to an employee, director, sole trader, partner or anyone else who you’ve added as a user in FreeAgent.

Please note that this option won’t be available for personal bank accounts or for a user who has been allocated the role of ‘Accountant’.

Select the relevant user from the ‘Payment to’ drop-down menu.

Next, select the relevant category from the ‘Category’ drop-down menu. You can choose from the following options:

• ‘Benefit in Kind’ (only if your FreeAgent account is listed as a limited company)
• ‘Expense Payment’
• ‘Net Salary and Bonuses’
• ‘Drawings’ (only if your FreeAgent account is listed as a sole trader or partnership)

Once you’ve selected the relevant category, select ‘Explain transaction’ to complete the process.

Purchase of capital asset

Select ‘Purchase of Capital Asset’ as the transaction ‘Type’ if the transaction relates to money used by the business to purchase a capital asset.

Choose the relevant ‘Asset Life’ and ‘Asset Type’ using the drop-down menus, then select ‘Explain transaction’ to complete the process. Read more on how to record the purchase of a capital asset.

Purchase of stock

Select ‘Purchase of Stock’ as the transaction ‘Type’ if the transaction relates to money used by the business to purchase stock. 

Choose the relevant stock item and quantity from the ‘Stock Item’ drop-down menu, then select ‘Explain transaction’ to complete the process. Read more on how to record the purchase of stock.

Credit note refund

Select ‘Credit Note Refund’ as the transaction ‘Type’ if the transaction relates to money refunded to a customer that you’ve created a credit note for.

Choose the relevant credit note to allocate the refund to using the ‘Credit Note’ drop-down menu, then select ‘Explain transaction’ to complete the process.

Other money out

Select ‘Other Money Out’ as the transaction ‘Type’ if the transaction relates to scenarios where money is paid out of your bank account that don’t fit into any of the above options. For example, when money is paid to a supplier who you owed money to on your FreeAgent start date.

For the example above, you would select ‘Payment to Initial Creditor’ from the ‘Category’ drop-down menu to reduce the trade creditor amount in your opening balances. If you assigned the balance to a contact, select the relevant contact from the ‘Contact’ drop-down menu.

You can also choose between the following categories for the ‘Other Money Out’ transaction ‘Type’:

• ‘Payment from Contra Account’.
• ‘Payment to Other Creditor’ if you’re paying an amount entered to ‘797 Other Creditors’ as part of your opening balances.
• ‘Pension Creditor’. 
• ‘Realized Currency Exchange Loss’ if you’ve created a foreign currency invoice and the exchange rate has changed between the date the invoice was issued and the date it was paid.
• Any custom current asset, liability or equity category that you’ve added.

Once you’ve selected the relevant category, select ‘Explain transaction’ to complete the process.