Even Margin Blog
Why a Transfer Between Your Accounts Shows Up as Income, and How to Fix It
A transfer between your accounts reads as income when only one side is recognized. How to spot it, recategorize it, and keep it counted right from now on.
The short answer
A transfer shows up as income when your bookkeeping software sees money arriving in one account without seeing that it came from another account you own. Categorize both sides as a transfer, and the money leaves your profit and loss, where it never belonged.
Moving money between your own accounts earns nothing and spends nothing. It changes where your cash sits, not how much your business made, so it belongs in a transfer category on both sides rather than in revenue or expenses.
Why it happens
Every bank account arrives as its own list of transactions. When Rachel moves $5,000 from her business savings into checking, the checking account sees $5,000 arriving and the savings account sees $5,000 leaving. Looked at alone, the arrival reads exactly like a customer paying an invoice.
The same thing happens with a credit card payment made from checking, money moved out of a payment app such as PayPal or Venmo into your bank, and a top-up from your bank into one of those apps. Each one is real, and each one is money staying inside your business.
Money you put into the business from a personal account is a close cousin. It is not income either: it is an owner contribution, and most bookkeeping software has a category for it.
How to fix it in any bookkeeping software
First, find the arrivals. Look at your income for round amounts, descriptions that mention a transfer or an account ending in four digits you recognize, and deposits that line up with a withdrawal from another of your accounts on the same day or the next.
Second, give both sides a transfer category. In most software it is called something like Account Transfer, with a separate category for credit card payments and one for owner contributions. Change the arriving side and the leaving side, so the two cancel out.
Third, check your profit and loss. Your revenue should drop by exactly the amount you recategorized, and your profit by the same. That is the sign it worked: the business did not earn less, your report now shows what it actually earned.
How to keep it right from now on
Connect every account money moves between. A transfer is easiest to recognize when both of its halves are in your books, so a savings account or credit card you left unconnected is the most common reason the arriving side looks like income.
For a transfer you make every month, such as a fixed amount into savings, a rule saves you the step: match the description or the account, and set the transfer category automatically.
How Even Margin handles it
When both accounts are connected, Even Margin pairs the money leaving one with the money arriving in the other and counts both as a transfer, so neither lands in your profit and loss.
Where more than one payment could be the other half, for example two transfers of the same amount in the same week, Even Margin asks you which one it was rather than picking. Where the other half is on an account you have not connected, it says so, and you confirm it as a transfer or give it a category.