How to Record Business Expenses Paid With Personal Funds in Quickbooks
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- เผยแพร่เมื่อ 23 ส.ค. 2024
- QBUniversity.org - In this Quickbooks training tutorial I detail the 3 ways how to record business expenses paid with personal funds in Quickbooks.
Many business owners pay for business expenses personally. Sometimes when they start the business, or even when the business is up and running. This video details how to make sure you record these expenses in Quickbooks correctly.
Discover the top 3 mistakes Quickbooks users make and how to get up and running in Quickbooks fast at QBUniversity.org
I'm going back through my books to correct errors I made the first two years in recording business expenses paid with personal funds (single member LLC/sole prop). I used the first method and created a Due to Owner liability account. At the end of 2018, I partially paid myself back by writing a check from my Operating Expenses checking account. How do I debit that amount from the Due to Owner account while also keeping it as a debit in my Operating Expenses account, so it matches the bank transaction/statement? Thanks so much---your QB videos are BY FAR the best on TH-cam!!!
thank you that was the best explanation and instructions I have found.
you're welcome!
finally a clear and easy tutorial!! Thank you
Carole Ly Sing Lao you’re welcome!
Awesome tutorial. Thank you very much.
Welcome!
What if you're a sole proprietor and you don't need to get reimbursed for a business expense made with a personal account? You're just wanting to document that you had a business expense that didn't come out of the business checking account, but rather the personal account. Only my business checking account and business credit card is listed on my QB.
You would do a journal entry debiting the expense and crediting an Owners Equity account
thanks for the explanation! how to pay the owner, not by pay bill but by petty cash register task?
In s-corporation, the owner had to use personal cc to purchased fuel on corporation's vehicle (The corp cc wouldn't work at times). Charges were incurred over a period of 2 years on and off. Owner wasn't going to ask for reimbursement. But, now due to pandemic owner requested to be reimbursed. A check was issued from Corp to owner. Corp uses QBOnline. It's not linked to bank accounts. How can that be entered into QBonline to reflect the reimbursement? Help!!! Fairly new to QBonline!
Just enter a bill for the total owed to the owner and pay the bill/cut them a check
@@QbuniversityOrg thank you!!
@@AR-fr8xx welcome!
I am not sure how to record my rent checks into QuickBooks or even what account to take it from with my new small business that I work out of my home
How is it being paid?
That was an awesome explanation, but when you record it as a bill, how do you reconcile at the end of the month?
Well you would pay the bill so the payment would show up in the reconciliation
Hello, Both ways will not show a record on the Supplier account. Example he bought office supplies from Costco and I would like to see this record on Costco supplier account and as liability to the any employee, means expected to pay them back. How to record then? Thank you
You are correct, unfortunately there is not a way to do this.
Could add class 'costco' in the transaction to analyze at later date for costco related expenses.
Thanks for your great videos. Indeed very clear and unseful. May I know how to add an initial company setup expenses paid by the owner be added as loan in quickbook? Thanks
The best way would be to add a journal entry where you credit the Loan from Owner liability account and debit the various expenses paid
Thanks. Can it also be added the owner as vender as you stipulated in your video to have a better tracking of the liability or bill pay accounts? Much appreciated again.
@@kamalgholami786 yep you sure can do that
Thanks
Can you do the same thing for Quickbooks online please???????? Please!???? I've been looking for this explanation
I'll have to do that, thanks!
Thank you! So if I add all these transactions into quickbooks as Loans due to owner, when I go to reimburse myself with a check do I record as follows: pay to owner (assign it as other instead of employee). At the bottom of the quickbooks write check screen under account assign it as Loans due to owner?
Stacy Wisler yep that’s exactly right!
Can you please explain how to enter an equipment or supplies purchased from for example a garage sales or an individual in Kijiji that has not issued receipt (invoice) and the item expenses were paid in cash by owner?
You would have to do a journal entry debiting the expense or asset for the supplies or equipment and crediting either Owner Contribution (equity) or Loan from Owner (liability)
Thanks. Can the owner contribution (equity) at some points be paid back to the owner such as a liability to a vendor, etc. ? And when it is going to be paid back under what category is going to be paid back?
Meanwhile, is that OK if the items purchased as a used or second hand item has no receipt to provide for the accounting purpose? How to make from the accounting point of view these transactions safe and doubt free if it comes to audit or provide the proof? Much appreciated again your useful channel.
Can I use 'owners draw' in journal entry? I have been doing owners draw and the other account is my business account for the entry.
Yep you can!
This is very useful information which i get from this video. I want to ask one more question. If amount is paid by personal Credit Card then entry will be same or different in QB?
Raza Hussain it kind of depends. In general it’s the same but see some of the other comments where I go through the answer to this. Thanks!
Thanks for the quick response, another quick question. My business rents out heavy machinery such as excavators. If I purchased a grease gun for the upkeep of my machines is that recorded as a business expense?
Stacy Wisler yep it sure is
I've ran across many tutorials to find the right way to do this before this tutorial, and want to thank you for its made so easy to understand how to enter business expenses paid with personal money.
I liked the last method of setting owner as a vendor .
my question to you is,
Myself as a small LLC owner/ Veterinarian who gets discount for purchases for business/ has bad habit of using personal CC for Business purchases.
wondering, how to make Military Discount benefit to personal instead of business.
For ex. I purchase supply for $1,000 and after the military 10% discount the total amount is $947(include Tax)
If i didn't get the military discount the Total amount will be $1,083 .
$136 more. it is not much, but it adds up to a great amount.
besides, LLC's expense is decreased and therefor LLC will be paying more tax on income as I am getting Military discount.
any advise? how I should handle this?
should I not use Military discount for business purchase? or should I add $136 to DUE TO Owner even though the total amount on the invoice is $947 (but shows the discount amount)
I think it can become a complicated mess trying to track a due to owner under this scenario. Since you own the business 100% it's all going to your pocket anyway. I would just record it at the net amount spent
Thank you I will take your advise!
@@jiyoungrondeau you're welcome!
Thank you for your tutorials. I have a question about this one...what if it's a plain transfer between bank accounts. It can be personal to business and the other way around. How do you record that? Assuming the transfer is a loan in both cases and that it will be paid. Thank you.
Set up a liability account called "Loan from Owner" or something like that and simply make the deposit to that account. When you pay it back, code the transfer to this same account
Great video...I have a lease car that I used entirely for my business. It is under my name and I pay it from my personal checking account. Can I create a monthly journal entry Debit car lease expense, CREDIT - due to the owner? And then I pay myself with a check? Thank you.
Yep you could do that
Hello! I entered a Purchase Order for Inventory Items and then inadvertently paid for the order with a personal CC. I recorded a "Receive Inventory Without Bill" and then entered a bill from owner for the items as outlined in the video. However, now my inventory shows up double for that item. How do I enter the bill from owner for an inventory item without increasing inventory? If I enter the bill from owner as an expense, what type of expense account would I use?
If you received without a bill then entered a bill again to pay you for the items then it would double count. I would go back and undo it and receive it with a bill. Then pay the bill with a dummy bank account. Then record a bill to you and put it to that dummy checking account
So what if I enter it in the journal I don’t want to get reimbursed for this and just show as an expense for taxes purposes?
Then show it as an equity contribution by you
So you should setup the employee as a vendor and not as an employee when you are doing expense reimbursements?
Yep I typically do only to delineate that any reimbursements are not earnings. Either way is fine really, but I just do it to keep them separate
I understand, but I still feel like I'm missing a step. A)The bill came in for electrician 80.00 , B) the business owner wrote a personal check for the bill 80.00. The business is contracted with another company that reimbursed the funds. Now the check has arrived and the owner needs to be paid. where am I missing
Did you record the expense paid by the owner?
Based on this video, it looks like I need to have other items set up prior to recording all of my business expenses. I opened a business recently and have 4+ months worth of expenses to record. Just not sure how I should be recording everything.
Not necessary other items but the expense accounts in your chart of accounts need to be set up
In general, does my personal money I put into a business get taxed when the business pays back that money?
Nope
@@QbuniversityOrg so I’m guessing that disbursement back to make cannot be a claimable business expenses?
@@electricmauinui3871 nope it can’t in general. Now if it’s to reimburse you for expenses you personally paid on behalf of the business you can. But if it’s a payback of equity or a loan you made to the business it cannot
@@QbuniversityOrg you’re the greatest. Thank you
@@electricmauinui3871 welcome!
Hi, we give our employees cash advances and the settle it up after they have purchased the items. So I might give $20 to my employee, then she spends only $19 of it. Or, she might spend $21 and needs to be reimbursed for the extra $1. How do I record this kind of business expense??
You would need to get receipts from them to find out what the money was spent on. Then, record those expenses. Sounds like a petty cash account. Account for what they spend the money on and keep tabs of the cash owed back to you by setting up some kind of petty cash account and recording the expenses through the check register
Question, so the best way to account for big business expenses paid out of owners account would be by a journal entry for example, computer, printer, permits, down-payment for insurance and broker fees ( this down-payment includes first and last month's premium plus fees) or will this particular transaction be considered pre paid insurance?
If it’s not going to be repaid right away and it’s counted as equity then yes. If it’s going to be paid back pretty quick then I would enter a bill. The insurance, yes, technically would be prepaid insurance.
Thank you very much for your quick reply. I love your videos they are very informative and well explained! I will do that thank you again
Is it necessary to record which personal account the money came from on your business books (in the loan from shareholder scenario)? Do you have to declare this transaction on your personal tax return? If being paid back from the company is a non taxable event, I’m hoping there’s no accounting necessary on the personal side. Just money going out and coming right back in for the same amount. A wash.
Yeah it’s a wash
Feel free to leave me a comment here!
I am not in quick books but am journalizing by hand. I just started an LLC using a personal credit card. How would this journal entry look? I am now able to obtain a business account so from this point forward wont use the personal card.
Alexander Bremmeyer I would actually just do an expense report and enter it as a bill to pay yourself back
Okay. If I understand you debit all start up costs to expenses than credit those expense to a liability to myself?
Alexander Bremmeyer yep that’s exactly right!
Thank you. Appreciate the clarification
Alexander Bremmeyer no problem!
If I used a Personal credit card to make multiple purchases for Items (COGS) to a specific Job, is it better to do a bill for each CC charge and expense it to myself like in the video? If I want pay the charges direct from business checking account, is better to set up a Credit card in chart of accounts and name it (i.e. Visa Personal) ? Is there a problem doing it this way (my cc can accept payment electronically from my business account) .. If not, how do I Tax-Line Map this so that the items I pay for get accounted for correctly, there are options for liabs/equity and also for COGS form 1125-A? I may be on the wrong track thinkin it would be easier to set this card up in QB but I do plan on using it in the future as well for COGS (Non-Inventory) items.
To be honest I would get a separate card for business and personal. It gets messy when you mix the two. I would personally leave it off the books as a CC and do an expense report each month to the company for the charges you made on behalf of the company. When you enter these expenses you can assign them to the Job.
If I used a cc linked to business 1 for an expense for business 2, how would I categorize that in the books for business 1 and business 2 (separate and accounts). I’ve asked like 10 people and nobody knows, and every time I call quickbooks they say they can’t answer it because they are not CPA’s.
Record it as a credit card charge classified as an Owners Draw on biz 1. Then on biz 2 do a journal entry and debit the expense and credit owner contribution. You could also do the same steps except instead of owner contribution and owner distribution record as Due from Biz 2 on biz 1 and a Due to Biz 1 on biz 2 books
I entered my business expense (paid by my personal credit card) as a bill owed just like you did in the video. Do I then need to add it as an expense in my personal taxes and that I got reimbursed for it? Or do I only enter it here on my business account.
Thanks in advance!
Hi,
So the owner of the company purchased items on his personal credit card and is submitting ACH payments from the the company’s operating account to pay the charges off on his personal card. Could I use the write check option in Quickbooks which would record the cash payment and the expense and make his personal credit card provider the vendor?
Yep you could do that
Hi, I'm wondering what would be the best option if the Owner purchases expenses with his personal credit card (which he also uses for personal use), then has the business pay that part of the credit card balance through the business account. He then transfers money from the Line of Credit he has for the business to his business account, essentially transfering the credit card balance to his Line of Credit.
Anyway how would you document this in order to later reconcile the accounts?
I would treat these as 2 separate transactions - 1) recording the business expenses paid with a personal card and 2) a transfer from the LOC to the business
Hello, I have a question that you might be able to help me with. I'm using QB Desktop Pro 2020 and following the journal entry method you described to enter a few transactions I paid with personal funds to start my LLC. I selected the relevant expense account for the debit side and used a 'Due to Owner' account for the credit side. My question is, do I need to (or should I) be putting something into the "Name" field? These expenses are with vendors that I will continue to do transactions with in the future so I want to be sure and track these expenses by vendor if possible. If I should be putting the vendor in the name field for the debit side of the transaction should I also create myself as a vendor and enter that on the credit side?
Thank you for your help, great video!
If you want to track by vendor for in the future then I definitely would put their names in there. For you, it's not necessary to do that but you of course can
Hi, I have a truck already and been doing the payment before I start my own business. Let say I started on January 2019 but still paying with my own money until May then I switch to pay with my business checking. How do I set up for my truck loan? If I want to track it from January? It will still out with the amount that I owe when I start the business? Or when I bought the truck 3 years ago?
You will have to record the truck and the loan on the business books as of 1/1/19 when you started using it for business. What you will do is a journal entry where you debit the truck as a fixed asset (Vehicle) for it's current value and credit the loan principal balance as a loan on the books. The difference will go to Shareholder/Owner Equity.
This has told me much more than the tutorials through quickbooks, Thank you. I still need a bit of clarity of the last option.
I am just starting an incorporated consultancy where I am the sole employee (so far). I've incurred business expenses (e.g. travel); the company has no funds yet (I, the "employee" need to be reimbursed). I just got quickbooks, so I want to do this right and leverage all the quickbook tools. I like the last option in your video, It seems the cleanest.
If I heard this correctly - It seems if I submit myself a bill, I am missing out on the quickbooks tool that records individual purchases (in the Expenses tab). Is this correct? Or is there a way to record all the individual purchases with the appropriate payee (as indicated on the receipt, and the reimburse the employee (myself) once the company has generated revenue.
AlteredBoot yep there is a way. It’s a bit more complicated though. First create a new Bank account called “Clearing.” Then enter your bills and pay them with this Clearing account (this will make it negative). Then create an other liability account called Due to Owner. Last do a journal entry debiting the Clearing account for the negative balance and crediting Due to Owner. Make sense?
@@QbuniversityOrg Thanks for the very quick reply. I think I get it, but I'm not sure how this differs from your second option in the video ("Due to Owner"). I wanted to avoid the personal loan to the company as I'm not sure how this impacts how I file taxes next year (I'm Canadian BTW).
Perhaps for simplicity I should just stick with the method that you use yourself and just submit an expense report as a bill.
AlteredBoot yeah maybe do that and what you can do is as you break out expenses in the bill you can at least specify the vendor of each in the memo section
Ok so what if I only have the basic quickbooks and don’t have the ability to use the bill pay? Would I log it as an expense somehow? I would like to use the last method you discussed.
You could always do a journal entry to show it as an amount owed to the owner, like "Loan from Owner" or something
Thank you for sharing such an informative video. I have a question, I posted below the opening balance journal entry in QBO when we first bought the business(created by the statement of adjustment received from a lawyer at the time of purchase).
Dr. Equipment 85,000
Dr. Leasehold 110,000
Dr. Goodwill 30,000
@t 300
Dr. Inventory 60,305.99
Cr. business Loan 177682.5
Cr owners equity(balance) 113,653.49
Now when I'm trying to reconcile the bank account it is showing the money I transferred to the business account which as I understand should be Credited to the owner's contribution account. But if I do so it will increase the balance in an equity account(owners equity & owners contribution together). What would you suggest?
hey man, quick question. You mentioned to insert business spending using personal account into quickbooks is by 1. using journal entry (expenses) in debit. 2. Create the opposite in journal entry as credit. 3. Enter the bill in expenses option. Is this correct? what do we do after this? do you have a whatsapp man? can i contact you?
If you do the journal entry route and put it to equity you don't need to do anything else. If you enter a bill then you would pay the bill and pay back the owner
I have a question regarding paying employees the reimbursement through direct deposit on their biweekly payroll. When you set them up as a vendor, it allows us me to also set up direct deposit information. However, it does not let me add it to their normal payroll, it only has me send it as a separate deposit. Is this what you would do?
Lizette Martinez You could do that, but you could also set up an after-tax payroll item and just include it as a payroll item so it’s direct deposited with their paycheck
@@QbuniversityOrg Thanks for the quick reply! Yes I would prefer to do it that way, but how can I mark the bill as paid if I do it that way? Do I assign it as a Check that's to be printed? How can I link the bill to the Miscellaneous Addition on their payroll?
Lizette Martinez well that’s the trade off. You can’t attach it to a bill if it’s in payroll
What if the owner has a seperate personal credit card that is used for the business only and has an on going balance
Heather M Arts then I would enter charges just like a regular business credit card. Watch this video to learn how:
th-cam.com/video/M0K41C3vz7E/w-d-xo.html
This is great!
Elisa Eve thanks!
Can credit petty cash and debiting expenses do the job ?
Not if it was personal money spent. That would work if petty cash was spent.
@@QbuniversityOrg
Thank you.
@@yazelz2197 welcome!
I just set up a bank account named personal and expense it out like a business account and then zero it out at the end of the month.
Jason Bronson that could work. How do you zero it out? Through distributions?
@@QbuniversityOrg Yeah as an Owners Draw
Jason Bronson that works
I have a company that is not Incorporated. It is only registered. Basically in the end, if I can't show a receipt or expence the money becomes personal money and is withdrawn as a personal income. What I will do cause I do driving in the U.S. I will purchase the approx. amount of U.S. cash from the bank for my fuel needs for the next two weeks. Normally I would collect the receipts and at the end of the month add them up and enter them into my spreadsheet as U.S. fuel. This is what I do with all my purchases and expenses. Collect the receipts and add them to the spreadsheet. Figure out the taxes I paid against the taxes I owe and submit the report to the government. I guess what I really need is an online spreadsheet and not Quick books??? Can someone please help make sense of all this?
The Plow Guys are you reporting in Canada or the US?
@@QbuniversityOrg Canada. I travel to the U.S. so while I am there I purchase gas. I use cash that I have exchanged from Canadian to U.S. from the bank. My bank statement shows one large withdrawal.
The Plow Guys so what I would do is withdraw the cash and in Quickbooks, set up a Petty Cash account. In QB do a transfer from your checking to this Petty Cash Account. Keep your receipts for the 2 weeks and when you get back, in QB record all those receipts as gas expenses against Petty Cash, and deposit what you have left over at the bank. This is from a US perspective. I would also think about getting Quickbooks Online so you can just record the receipts or scan them on your phone while on the go. If you don’t use QBO get something like Expensify.
@@QbuniversityOrg I have QB. Just that the learning curve is throwing me for a bit of a loop here.
@@ThePlowGuys yeah it definitely is a process to follow in Quickbooks, especially if you have never used it. The difference between my tutorials here on YT and my paid training at QBUniversity.org, is the paid training walks you through from the very basic beginnings of QB to how to record everything. Plus I give personal detailed support answering your questions. You should check it out.
Hi ,
If my employee buy supplies for restaurants with her money $ 100 and I need to pay her back. I write business check to her under her name. How can I record on Quickbooks. Thanks
Record it as the expense you are reimbursing for
What I understand is put her name as a vendor then pick a supplies for expenses. Is that correct?
@@Tyrinda if what you are reimbursing for is supplies then yes that is correct
Thank you so much
@@Tyrinda welcome!
If person writes a bill to a company and get paid, does person needs to file it as taxable income?
If you are getting reimbursed for expenses you paid on behalf of the company, no it is not taxable income to you