Why Your Family Clients' Books Never Agree With Each Other
When money moves between a client, their HUF and the family company, each set of books tells a different story. Here's how to keep them telling the same one.
You know the family. Jinay has his salary account. There’s the Jinay Shah HUF, and there’s Shah Textiles Pvt Ltd, where he’s a director. Over the year, money moves between all three: a gift to the HUF in April, a loan to the company in May when a supplier payment came due, a few transfers between his own accounts.
Then March arrives, and the three sets of books don’t agree.
The same rupee, three stories
Every one of those movements is real money, and every one appears in two places. The ₹2,00,000 gift is a debit in Jinay’s HDFC statement and a credit in the HUF’s ICICI statement. The loan is a debit for Jinay and a credit for the company.
Treat each statement on its own and things go wrong in predictable ways:
- The money gets counted twice. Jinay’s side reads as an expense, the HUF’s side as income, and the family’s position looks bigger and busier than it is.
- The labels drift. One side is booked as “Gift”, the other as “Other income”. The company records the director’s money as revenue instead of a loan it has to repay.
- Nobody notices until year-end, when the HUF’s capital doesn’t reconcile and the company’s balance sheet carries a figure no one can explain.
None of this is anyone’s fault. It’s what happens when related books are kept as unrelated ones.
What keeps them in agreement
Practices that close family clients cleanly do three things:
- Treat the family as one client with several entities. The individual, the HUF and the company each keep separate books, but you look at them together.
- Pair both sides of every internal movement. A debit in one entity should find its matching credit in another. NEFT, RTGS and IMPS transfers carry a reference number (the UTR) on both statements, which makes the pairing exact rather than a guess based on date and amount.
- Label the pair once, correctly. A gift is a gift on both sides. A loan is a loan the company owes, not income. Self-transfers between a person’s own accounts aren’t income or expense at all.
Do that through the year and March becomes a review, not an investigation.
Where Lekhavo fits
Lekhavo keeps a client’s entities under one roof and reads each bank’s own statements. When the same UTR appears as a debit in one entity and a credit in another, it pairs the two automatically. The gift, the loan and the self-transfers stay out of income and expense, and each entity’s P&L and Balance Sheet account for them correctly. You can watch a one-minute example with a family of three entities.
Sign up free and set up your next family client as one.