thanks for the video. you said at the beginning, a journal entry is one way to account for owners using personal funds. Is another way by creating a vendor expense and manually adding owners equity as a line item to zero out the entry? Pros ? Cons ? between journal vs expense entry?
Hi, Ron, and thanks for the question. That is an interesting and creative way to record the transaction! I think it will accurately put the main elements of the transaction - the expense and the owner contribution - into their respective spots on the financial reports. There is one possible con. It could be a minor con. If you record it as an expense transaction, when you go to reconcile the checking account that expense transaction will show up as a deposit for $0.00. It won't affect the ending balance, but if you have an error in your reconciliation with another transaction, you wouldn't be able to rely on the transaction count for Payments and Deposits. But if this method works for you, I think it works!
I'm also trying to decide between the journal entry vs the expense method. I tried journal entry and the amounts are not showing in my expense report. Is this normal?
Omg I’ve been trying to resolve this issues for weeks and the QuickBooks tutorial was confusing. Your video was so simple and straightforward!! And I love the bit at the end where you mentioned connecting your personal account only to weed out the few business expenses not being worth it in the end. I had to learn the hard way initially when I set up QB with both personal and business! Had to reset everything again. Thanks for the tips! New sub now! Do you have any tips on how I can do several years of taxes at once. I believe there’s a limit to how far back you can go on QB. Thank you!
Thank you so much for watching and commenting! I'm very happy to hear the video helped you. We are thrilled you subscribed. You asked excellent questions, so we are going to make a video walking through those, but maybe this can get you started. As far as going back multiple years in QBO, you can record transactions many years back. I tried in the Sample Company to manually record transactions as far back as the year 2000 and it worked. I believe QB will import transactions as far back as a bank allows. The issue is that banks are all different in how far back they make transactions available for download when you connect the bank account with QB. Some banks only make the previous 90 days available through the auto-connection. Other banks will go back at least a full year. Even those banks that stop at 90 days will usually make transactions available past 90 days for manual download on the bank's website, then you import those transactions into QB manually. Everything with previous years' taxes should start with a discussion with your CPA to put together a strategy for what years you're going to file and in what order.
I noticed that there other videos where they use a clearing account and create an expense for the personal transaction and they create a journal entry afterwards to add the owner's investment to get the clearing account to $0. Are there any benefits to doing it this way or is it just an unnecessary extra step?
Thank you for this! I am wondering if this can also be done by just "paying down the credit card" option even if it is the owner's personal credit card. As example, I am a new small business and I was unable to get a business credit card so unfortunately I had to use my personal credit card for most of my business purchases. Some of these expenses I reimbursed myself for, and others I did not. However, all of these were purchases/expenses were made on my personal credit card. I am wondering if a journal entry is still the best way to record all of my transactions made on my credit card and if it differs if it was a transaction i reimbursed myself for or not? What I did was create my credit card as a "payment account" and just paid down the credit card for those transactions that I reimbursed myself for, and for the other I did not reimburse myself, i created the owners investment account as the video explains above. Do you see any problems with the method I did it? thanks so much!
It is very common for owners of new small businesses to just get going with whatever money/credit they have available, so you are not alone in that! It should not matter whether you reimbursed yourself or not yet. In either instance, when you make a purchase on your personal credit card, you are increasing either an asset or expense account and increasing your equity account. When you reimburse yourself, you are decreasing your company bank account and decreasing your equity account If that "payment account" is an equity account, you should be ok. Thanks for watching and commenting, Rebecca!
Hello... This really is an excellent video. Well done. I recorded about 50 journal entries according to your instructions above in order to pay for my startup business expenses with my personal fund. But I notice now that all these 50 expenses are not listed on the expenses list. Just those expenses paid through the linked business bank account. Is this a problem later at end of year accounts?
Hey Ben, thanks for watching and commenting! The Journal Entries should flow through to expense accounts if you used expense accounts in the journal entries. You may also want to check the dates of the actual journal entries and make sure your report is covering dates that the journal entries were entered. Let me know if that clears it up or if you have any other questions.
@@worldwidebookkeeping Yes the journal transactions are appearing in each expense account in the chart of accounts section but they are not appearing when I click on the expenses section menu button on the left. Why is this?
Yes this is the SAME issue I am having!! The journal entry is done. And the expenses shows on the profit and loss but not on each individual expense account. I am trying to send a 1099 to one of those vendors but quickbooks is showing I didn’t pay them anything.. so I just not 1099 them ?
@@candicewhitley3750 Entries from the Journal Entries do not show up in the Expense/Vendor tab. However, if you open a Profit & Loss statement and look in the Display Columns By dropdown, choose Vendors. Also, I'm sure you already looked at this, but in the Journal Entry, double check that you entered the vendor name on the same journal entry line as the expense.
@@benkhalifa8713 I didn't realize what you were asking until I saw Candice's comment below. I do not know why QBO does not include journal entries in the Expense/Vendor section. If you open a Vendor's profile and try to add new transaction from their profile, your options are Time Activity, Bill, Expense, Check, Purchase Order, Vendor Credit, Pay Down Credit Card. So my guess is only transactions types show up in the Expense/Vendor section. To see the journal entries included, you can open a Profit & Loss for the period of time you want to view, then Display Columns by Vendors. The journal entries will be added into the total of each vendor's expenses.
Thank you for the video. It was very helpful. Now that the je is entered. How would you get reimbursed for the expense if you would like to pay yourself back? Thanks in advance,
Thank you for watching and the question. You can pay yourself out of your business checking account for the amount you want to reimburse. When it clears the bank and comes through the bank feed, you will categorize it to the same owners equity account you used in the journal entry.
I paid a few things off with my personal account before I had the business account set up. At the same time still had a lot of expenses. Now it shows that my Equity is larger than my companies assets, why?…
On Quickbooks Self-Employed, in the "Transactions" tab under "TYPE" do you classify payments for business credit cards charges using your personnal fund as "Business" or "Personal" ? Thank you!
Hi Cyril and thanks for the question. I'm much more experienced with QuickBooks Online compared to the Self-employed version, so bear with me as I go through a long answer to your question. The assumption for anyone using QB Self Employed is that they will be filing their business taxes on their personal return through the Schedule C. Schedule C mainly focuses on the income and expenses of the business in the past tax year. If you select business as the Type, QB Self Employed records the payment as a transfer. A transfer would indicate moving money from a bank account to pay down the balance of the credit card. If you select personal, it merely records it as a personal expense. Both of those selections keep that payment from being recorded as either business income or a business expense. So to me, either business or personal is fine in that they don't affect the Business Profit $ amount in QB Self Employed. Interesting how they do that. Thanks again for the question!
Thank you for the great explanation. In my instance, it is actually for a small construction company. The expense that I paid for out of my personal account also needs to be assigned to a job project in order for the project to accurately detail costs & profit margins, so ideally it needs to be recorded to the job and as an owners investment. How do you do this?
Excellent question, Quentin! When you go into the project you are working on, click on "Add to Project" and add a new expense. You will manually add this expense and mark it as coming out of your business checking. Add the expense(s) as line items on your expense and mark as billable expense if applicable. Let's say the amount you spent on the expense with your personal account was $500. You add your expense as $500. Then you add a line for the owner investment and mark it as -$500. It might feel weird, but the end result is increasing the expense by $500, increasing owner's investment by $500, and increasing your business checking account by $0.
@@worldwidebookkeeping thank you for explaining this. I had a similar question as, I followed the first step for the journal entry. However, I also created the sub contractors charge as a Bill. So I am not sure how to close the bill out since it is not giving me the same options as if I were to use the expense option.
What happens when your doing a cleanup and there are 50-100 of these transactions. What’s best practice to include them all without doing all individual JEs. Also receipts were uploaded to QBO, how do they get attached? It only offers expense or bill and can’t use equity accounts as the bank/credit account. Thanks.
I know what you mean about not being able to use equity accounts as the bank/credit card account. I have tried previously to do just that and got an error message. However, just before typing this reply, I added a receipt into my QBO file and tried using the equity account just to see what happens. It accepted the transaction and let me use the equity account as the bank/credit account. Not sure if this is an update to QBO but it worked just a minute ago. So you may want to try it again. If that still doesn't work, you could potentially do one journal entry with all 50-100 transactions. That's probably not best practice, but it is faster than individual JEs. Sounds like your client uploaded the receipts, but if you could get the receipts, you can attach them manually to the bottom of the JE.
If you wanted the company to pay yourself back for a business expense you paid out of your personal bank account, you could move the money from the business to personal account. Thank you, Francisco!
so would we just attach the receipt for the purchase at the bottom of the journal entry? Is there any other place these receipts need to go or is this good enough for my accountant to use for deductions? Thanks ! :)
Hi Logan! Yes, you can attach the receipt at the bottom of the journal entry. That should be good enough for your accountant. Thanks for watching and commenting!
@@loganhoelle3931 For most transactions, you can just include the sales tax amount in the total expense price. If it is a large asset purchase where you will be depreciating the asset over time, it's best to ask your accountant on how to handle that sales tax.
David- my LLC renovate then sale homes.. I used my personal credit card to pay contractors and business expenses. how should I pay myself back? I recorded them as cc expenses for home depot and another account for personal cc..My home depot card is also in my name. Should it be under owners investment? Then do an owner draw to pay myself back?
Hey thanks for watching and commenting! Some business owners have credit cards in their personal name, but treat them as if they are business credit cards. They intend to make all purchases for business purposes and make payments from their business bank accounts. It sounds like that is what you did for your Home Depot account. So you can add your Home Depot CC to the chart of accounts, and make payments from the business bank account as a credit card payment. If you used another personal credit card to pay your contractors, you can use a journal entry to record those payments as owners/partner investments and do an owner draw to pay yourself back just like you thought.
Thank you for sharing this information. I need help in how to allocate the tax portion of the expense so that I can report it to government. Please advise. Thank you.
Hi, really useful video, thank you! How do i then go on to record the reimbursement when i'm ready to pay it back? I was advised with a Directors account to pay it out as a check, but if ive paid it back to myself by bank transfer how do i record this? Thanks so much in advance :)
Thank you for watching and commenting! With a bank transfer, this will actually be recorded the same way as a check. The bank transfer you used to reimburse yourself should flow through you bank feed as a transaction where money was spent out of the business bank account. Just make sure to change the transaction from "record as transfer" to "categorize". That way, you'll be able to specify that the business paid you personally and you can select your owner equity account you use, such as Owner Draw or Owner Distribution, etc.
@@worldwidebookkeeping This video is great! Question about the reimbursement - if you categorize it as a Partner Distribution, won't that be taxable (e.g. treated as income)? I would think you want it to be a transfer of funds or something other than distribution since it is a reimbursement, not income. Thanks!
@@pjacobs75 Thank you so much for the compliment and for watching! I always think about the reimbursement along with the initial purchase made on your personal credit card. The initial purchase is a contribution, which increases your equity. The reimbursement as a distribution decreases your equity for the same amount. If you are a sole proprietor or sole member LLC, you're taxed on the net income of the business. Distributions show up on the balance sheet, so they don't affect net income. If you're in a partnership or corporation, you are taxed on your percentage of the business at its net income. Owners' equity positions are more closely tracked in multiple owner companies through the K-1, but the method of bookkeeping in the video above has no net effect on owner equity. Let me know if you have any other questions!
Hi Stephanie, thanks for watching and asking a question! Regarding purchases with your personal cash or debit cards, you can add those receipts to the journal entry. Either when you're creating the journal entry or editing it later, you can add the receipt at the bottom-left part of the page in the attachments section by either clicking on the paper clip to select your file to attach or drag and drop your receipt into that box. If they are receipts made on business cards, you can add the receipt to the expense in your bank feed section of QuickBooks or adding the receipt in the Bank Transactions section. The receipts function of QuickBooks gives you the option to add scanned receipts saved on your computer, Google Drive, forward from email, or using the mobile app to scan the receipt. Thank you!
Even if they want to be reimbursed, I would do it this way. This allows you to record the expense portion on the personal card along with the purchase price being recorded as his equity contribution to the company. When he reimburses himself, the reimbursement will be recorded as a negative to the equity contribution or a positive distribution. Either way shows the equity go up when he pays for the business expense with his personal card, and equity go back down by that amount with the reimbursement. Thanks for watching and commenting!
That is true, Paul. As of right now, I'm not aware of a workaround to make it show up in the expenses/vendors sections. However, if you run your Profit & Loss Report, the journal entry should be reflected in the corresponding expense account you recorded the journal entry in. Also, if you run the Expenses by Vendor Summary or just a Profit and Loss sorted by Vendors, those reports will include journal entries to show the total you spent with that vendor. Thanks for watching and commenting!
Hi Morgan, you can write a check to yourself for the reimbursement or pull cash from an ATM. When that check or ATM transaction comes through your bank feed, categorize it to the same Owner's Equity account you used in the journal entry in the first transaction.
So I have a client that sometimes pays a payment on his business credit card with his personal checking account (not in QB). When I tried to enter it (2021 Desktop) it wouldn't let me put Owner's Contribution for the acct. It said I had to have a bank account for the transaction (I used the check register). I feel like I'm doing it wrong!.... any suggestions on how to fix this? Thanks in advance, Lisa
Hi, Lisa! Thanks for the question. That sounds correct that if you try to record a transaction within a check register, QB will be looking for a bank account to take the money from. In desktop, you should be able to create a journal entry under the "Company" tab. Once you pull up a blank journal entry, you can follow the rest of the video to record the payment from the personal bank account (still an Owner's Contribution) to the credit card.
Hi Gretchen and thanks for the question! In any journal entry, there must be debit(s) and credit(s) because QuickBooks Online uses double entry accounting. Before you can save the journal entry in QuickBooks, the total debits must equal the total credits. Otherwise, you will get an error message and QuickBooks won't save the Journal entry until they match. If you tell me a little more about the transaction and what you're trying to do, I can help you get it recorded.
I hardly ever have cash transaction. So what is the best way to record a cash transaction for my business if I didn't' deposit it. Can i just do a journal entry and so owners withdraw and credit to service income?
Hi Patricia, thanks for the comment and watching the videos. Yes, creating a journal entry using the owners withdraw and service income accounts will work.
Hi.all expenses of the company were paid using the personal credit cards and later the company will pay back the owners. Will it be okay to use advances from owners as for the credit in the journal entry?
Hi, thanks for the question. You would record journal entries for the payments made on personal credit cards. The credit side for those entries would be the equity account like owner draw. If you reimburse through your company checking account, you could just categorize the transaction when it comes through your bank feed.
Thank you Inkstone! If you credit account payable to the owner, and assuming you set up accounts payable to the owner as a liability, you will be recording a balance the company owes to you the owner. When you pay yourself back for that purchase, you'll want to make sure you take that reimbursement to the accounts payable to the owner. Great question.
Great question. You'll want to confirm with your tax advisor but when the transaction comes through your bank feed, you'll categorize as normal but instead of an expense account, you will use an Equity account like Owner's Draw or Owner's Distribution or Personal Expense (which would still be an Equity account). Ask your tax preparer exactly which equity account to use. This equity account will remove the transaction from your Profit & Loss so you aren't trying to claim a business expense for it.
Hi Tino, thanks for watching and thanks for the question. Is the initial investment payable to you or someone else? Is there any interest on the investment?
@@worldwidebookkeeping yes it's an LLC my wife and I run, no interest, we're just recouping out initial investment, ie, paying ourselves back. About 3k initially, followed by 1k per week +/-. We're writing checks to ourselves for this.
@@cpabrego Great, thank you for the info. You could set up the initial deposit into the company as Owner Investment (an equity account). Then as you write the checks for $3000 then $1k per week, you could take those checks to the Owner Investment account. The deposit builds up the equity account, then the checks decrease the equity account. Great question!
Hi Joanne! Since you called it gst, I'm not sure if you're in a country other than the US. I have no idea how other countries treat taxes. You'll probably want to confirm with your tax advisor how to treat gst, but here's what I do with sales tax in the US. I typically include the sales tax along with the rest of the purchase. If I spent $67.29 on office supplies and that amount includes sales tax, I put the entire amount of $67.29 toward office supplies.
Hi Joanne. I'm from Canada as well. I'm going to assume that you are HST / GST registered and submit for input tax credits. If so, for the example he used below, apply $67.29 to office supplies and then the tax portion $8.75 to your Paid on purchases HST tax account. Line 3 would be Credit to Shareholder investment for the total including tax $76.04. Hope that helps.
Hi Greg, if you pay yourself back from one of the business bank accounts, that transaction will flow through the bank feed for that account. Categorize that transaction as an owner equity account or Owner Investment/Owner Distribution. Thanks for the comment.
Sorry for the late reply, but assuming the business credit card is connected to QBO and importing transactions, the payment will show up in the list of transactions in the banking/transactions tab. You would categorize the transaction and use whichever equity account you are using to record owner contributions.
In the UK it's more common to call the personal account Director's Loan or Director's Current account. Assuming it's a limited company of course!
Very interesting, Neil. Thank you for adding that!
thanks for the video. you said at the beginning, a journal entry is one way to account for owners using personal funds. Is another way by creating a vendor expense and manually adding owners equity as a line item to zero out the entry? Pros ? Cons ? between journal vs expense entry?
Hi, Ron, and thanks for the question. That is an interesting and creative way to record the transaction! I think it will accurately put the main elements of the transaction - the expense and the owner contribution - into their respective spots on the financial reports. There is one possible con. It could be a minor con. If you record it as an expense transaction, when you go to reconcile the checking account that expense transaction will show up as a deposit for $0.00. It won't affect the ending balance, but if you have an error in your reconciliation with another transaction, you wouldn't be able to rely on the transaction count for Payments and Deposits. But if this method works for you, I think it works!
@@worldwidebookkeeping thank you so very much. Again, great and very useful video!
I'm also trying to decide between the journal entry vs the expense method. I tried journal entry and the amounts are not showing in my expense report. Is this normal?
Excellent video and thank you for the way you explained it.
Omg I’ve been trying to resolve this issues for weeks and the QuickBooks tutorial was confusing. Your video was so simple and straightforward!! And I love the bit at the end where you mentioned connecting your personal account only to weed out the few business expenses not being worth it in the end. I had to learn the hard way initially when I set up QB with both personal and business! Had to reset everything again.
Thanks for the tips! New sub now!
Do you have any tips on how I can do several years of taxes at once. I believe there’s a limit to how far back you can go on QB.
Thank you!
Thank you so much for watching and commenting! I'm very happy to hear the video helped you. We are thrilled you subscribed. You asked excellent questions, so we are going to make a video walking through those, but maybe this can get you started.
As far as going back multiple years in QBO, you can record transactions many years back. I tried in the Sample Company to manually record transactions as far back as the year 2000 and it worked.
I believe QB will import transactions as far back as a bank allows. The issue is that banks are all different in how far back they make transactions available for download when you connect the bank account with QB. Some banks only make the previous 90 days available through the auto-connection. Other banks will go back at least a full year.
Even those banks that stop at 90 days will usually make transactions available past 90 days for manual download on the bank's website, then you import those transactions into QB manually.
Everything with previous years' taxes should start with a discussion with your CPA to put together a strategy for what years you're going to file and in what order.
I noticed that there other videos where they use a clearing account and create an expense for the personal transaction and they create a journal entry afterwards to add the owner's investment to get the clearing account to $0. Are there any benefits to doing it this way or is it just an unnecessary extra step?
I was wondering the same.
Thank you for this! I am wondering if this can also be done by just "paying down the credit card" option even if it is the owner's personal credit card. As example, I am a new small business and I was unable to get a business credit card so unfortunately I had to use my personal credit card for most of my business purchases. Some of these expenses I reimbursed myself for, and others I did not. However, all of these were purchases/expenses were made on my personal credit card. I am wondering if a journal entry is still the best way to record all of my transactions made on my credit card and if it differs if it was a transaction i reimbursed myself for or not? What I did was create my credit card as a "payment account" and just paid down the credit card for those transactions that I reimbursed myself for, and for the other I did not reimburse myself, i created the owners investment account as the video explains above. Do you see any problems with the method I did it? thanks so much!
It is very common for owners of new small businesses to just get going with whatever money/credit they have available, so you are not alone in that!
It should not matter whether you reimbursed yourself or not yet. In either instance, when you make a purchase on your personal credit card, you are increasing either an asset or expense account and increasing your equity account. When you reimburse yourself, you are decreasing your company bank account and decreasing your equity account
If that "payment account" is an equity account, you should be ok.
Thanks for watching and commenting, Rebecca!
Great video mate, thanks!
Thank you! I hope the video helped. Let me know if you have any questions about QuickBooks.
Hello... This really is an excellent video. Well done. I recorded about 50 journal entries according to your instructions above in order to pay for my startup business expenses with my personal fund. But I notice now that all these 50 expenses are not listed on the expenses list. Just those expenses paid through the linked business bank account. Is this a problem later at end of year accounts?
Hey Ben, thanks for watching and commenting! The Journal Entries should flow through to expense accounts if you used expense accounts in the journal entries. You may also want to check the dates of the actual journal entries and make sure your report is covering dates that the journal entries were entered. Let me know if that clears it up or if you have any other questions.
@@worldwidebookkeeping Yes the journal transactions are appearing in each expense account in the chart of accounts section but they are not appearing when I click on the expenses section menu button on the left. Why is this?
Yes this is the SAME issue I am having!! The journal entry is done. And the expenses shows on the profit and loss but not on each individual expense account. I am trying to send a 1099 to one of those vendors but quickbooks is showing I didn’t pay them anything.. so I just not 1099 them ?
@@candicewhitley3750 Entries from the Journal Entries do not show up in the Expense/Vendor tab. However, if you open a Profit & Loss statement and look in the Display Columns By dropdown, choose Vendors.
Also, I'm sure you already looked at this, but in the Journal Entry, double check that you entered the vendor name on the same journal entry line as the expense.
@@benkhalifa8713 I didn't realize what you were asking until I saw Candice's comment below. I do not know why QBO does not include journal entries in the Expense/Vendor section.
If you open a Vendor's profile and try to add new transaction from their profile, your options are Time Activity, Bill, Expense, Check, Purchase Order, Vendor Credit, Pay Down Credit Card. So my guess is only transactions types show up in the Expense/Vendor section.
To see the journal entries included, you can open a Profit & Loss for the period of time you want to view, then Display Columns by Vendors. The journal entries will be added into the total of each vendor's expenses.
Thank you for the video. It was very helpful. Now that the je is entered. How would you get reimbursed for the expense if you would like to pay yourself back? Thanks in advance,
Thank you for watching and the question. You can pay yourself out of your business checking account for the amount you want to reimburse. When it clears the bank and comes through the bank feed, you will categorize it to the same owners equity account you used in the journal entry.
I paid a few things off with my personal account before I had the business account set up. At the same time still had a lot of expenses. Now it shows that my Equity is larger than my companies assets, why?…
wow ! it was pretty easily understandable ! thank you !
Thank you Nowshin! I'm glad it helped
On Quickbooks Self-Employed, in the "Transactions" tab under "TYPE" do you classify payments for business credit cards charges using your personnal fund as "Business" or "Personal" ? Thank you!
Hi Cyril and thanks for the question. I'm much more experienced with QuickBooks Online compared to the Self-employed version, so bear with me as I go through a long answer to your question.
The assumption for anyone using QB Self Employed is that they will be filing their business taxes on their personal return through the Schedule C. Schedule C mainly focuses on the income and expenses of the business in the past tax year. If you select business as the Type, QB Self Employed records the payment as a transfer. A transfer would indicate moving money from a bank account to pay down the balance of the credit card. If you select personal, it merely records it as a personal expense.
Both of those selections keep that payment from being recorded as either business income or a business expense. So to me, either business or personal is fine in that they don't affect the Business Profit $ amount in QB Self Employed. Interesting how they do that.
Thanks again for the question!
Thanks man. Has helped me tremendously.
That's great to hear, Clint! Glad we could help and thanks for watching.
Thank you for the great explanation. In my instance, it is actually for a small construction company. The expense that I paid for out of my personal account also needs to be assigned to a job project in order for the project to accurately detail costs & profit margins, so ideally it needs to be recorded to the job and as an owners investment. How do you do this?
Excellent question, Quentin! When you go into the project you are working on, click on "Add to Project" and add a new expense.
You will manually add this expense and mark it as coming out of your business checking. Add the expense(s) as line items on your expense and mark as billable expense if applicable. Let's say the amount you spent on the expense with your personal account was $500. You add your expense as $500. Then you add a line for the owner investment and mark it as -$500. It might feel weird, but the end result is increasing the expense by $500, increasing owner's investment by $500, and increasing your business checking account by $0.
@@worldwidebookkeeping thank you for explaining this. I had a similar question as, I followed the first step for the journal entry. However, I also created the sub contractors charge as a Bill. So I am not sure how to close the bill out since it is not giving me the same options as if I were to use the expense option.
What happens when your doing a cleanup and there are 50-100 of these transactions. What’s best practice to include them all without doing all individual JEs. Also receipts were uploaded to QBO, how do they get attached? It only offers expense or bill and can’t use equity accounts as the bank/credit account. Thanks.
I know what you mean about not being able to use equity accounts as the bank/credit card account. I have tried previously to do just that and got an error message.
However, just before typing this reply, I added a receipt into my QBO file and tried using the equity account just to see what happens. It accepted the transaction and let me use the equity account as the bank/credit account. Not sure if this is an update to QBO but it worked just a minute ago. So you may want to try it again.
If that still doesn't work, you could potentially do one journal entry with all 50-100 transactions. That's probably not best practice, but it is faster than individual JEs. Sounds like your client uploaded the receipts, but if you could get the receipts, you can attach them manually to the bottom of the JE.
After the JE, would I take the money from my business account into my personal?
If you wanted the company to pay yourself back for a business expense you paid out of your personal bank account, you could move the money from the business to personal account. Thank you, Francisco!
so would we just attach the receipt for the purchase at the bottom of the journal entry? Is there any other place these receipts need to go or is this good enough for my accountant to use for deductions? Thanks ! :)
Hi Logan! Yes, you can attach the receipt at the bottom of the journal entry. That should be good enough for your accountant. Thanks for watching and commenting!
@@worldwidebookkeeping Would we include sales tax in these entries as well? if so what account type and detail type would that be? Thanks !!
@@loganhoelle3931 For most transactions, you can just include the sales tax amount in the total expense price. If it is a large asset purchase where you will be depreciating the asset over time, it's best to ask your accountant on how to handle that sales tax.
David- my LLC renovate then sale homes.. I used my personal credit card to pay contractors and business expenses. how should I pay myself back? I recorded them as cc expenses for home depot and another account for personal cc..My home depot card is also in my name. Should it be under owners investment? Then do an owner draw to pay myself back?
Hey thanks for watching and commenting! Some business owners have credit cards in their personal name, but treat them as if they are business credit cards. They intend to make all purchases for business purposes and make payments from their business bank accounts. It sounds like that is what you did for your Home Depot account. So you can add your Home Depot CC to the chart of accounts, and make payments from the business bank account as a credit card payment.
If you used another personal credit card to pay your contractors, you can use a journal entry to record those payments as owners/partner investments and do an owner draw to pay yourself back just like you thought.
Thank you for sharing this information. I need help in how to allocate the tax portion of the expense so that I can report it to government. Please advise. Thank you.
Hi Rita! Is this for Sales Tax in the US?
@@worldwidebookkeeping no it's not. It's for Canada.
also what about sales tax collected in the purchase?
Hi, really useful video, thank you! How do i then go on to record the reimbursement when i'm ready to pay it back? I was advised with a Directors account to pay it out as a check, but if ive paid it back to myself by bank transfer how do i record this? Thanks so much in advance :)
Thank you for watching and commenting! With a bank transfer, this will actually be recorded the same way as a check. The bank transfer you used to reimburse yourself should flow through you bank feed as a transaction where money was spent out of the business bank account. Just make sure to change the transaction from "record as transfer" to "categorize". That way, you'll be able to specify that the business paid you personally and you can select your owner equity account you use, such as Owner Draw or Owner Distribution, etc.
@@worldwidebookkeeping This video is great! Question about the reimbursement - if you categorize it as a Partner Distribution, won't that be taxable (e.g. treated as income)? I would think you want it to be a transfer of funds or something other than distribution since it is a reimbursement, not income. Thanks!
@@pjacobs75 Thank you so much for the compliment and for watching! I always think about the reimbursement along with the initial purchase made on your personal credit card. The initial purchase is a contribution, which increases your equity. The reimbursement as a distribution decreases your equity for the same amount. If you are a sole proprietor or sole member LLC, you're taxed on the net income of the business. Distributions show up on the balance sheet, so they don't affect net income. If you're in a partnership or corporation, you are taxed on your percentage of the business at its net income. Owners' equity positions are more closely tracked in multiple owner companies through the K-1, but the method of bookkeeping in the video above has no net effect on owner equity. Let me know if you have any other questions!
Ah, this makes sense. Thanks for the clarification. @@worldwidebookkeeping
I scanned my receipts i made purchases with my personal cash, debit, business cards. How do I attach that to journal entry or what do I do?
Hi Stephanie, thanks for watching and asking a question! Regarding purchases with your personal cash or debit cards, you can add those receipts to the journal entry. Either when you're creating the journal entry or editing it later, you can add the receipt at the bottom-left part of the page in the attachments section by either clicking on the paper clip to select your file to attach or drag and drop your receipt into that box.
If they are receipts made on business cards, you can add the receipt to the expense in your bank feed section of QuickBooks or adding the receipt in the Bank Transactions section. The receipts function of QuickBooks gives you the option to add scanned receipts saved on your computer, Google Drive, forward from email, or using the mobile app to scan the receipt.
Thank you!
Would you still do it this way if the owner wants to be reimbursed for the funds that were paid from his personal card?
Even if they want to be reimbursed, I would do it this way. This allows you to record the expense portion on the personal card along with the purchase price being recorded as his equity contribution to the company. When he reimburses himself, the reimbursement will be recorded as a negative to the equity contribution or a positive distribution. Either way shows the equity go up when he pays for the business expense with his personal card, and equity go back down by that amount with the reimbursement. Thanks for watching and commenting!
When I add expense in journal it does not show up in expenses in Quickbooks
That is true, Paul. As of right now, I'm not aware of a workaround to make it show up in the expenses/vendors sections. However, if you run your Profit & Loss Report, the journal entry should be reflected in the corresponding expense account you recorded the journal entry in. Also, if you run the Expenses by Vendor Summary or just a Profit and Loss sorted by Vendors, those reports will include journal entries to show the total you spent with that vendor. Thanks for watching and commenting!
If this is how I record a reimbursement. How do I actually pay that out?
Hi Morgan, you can write a check to yourself for the reimbursement or pull cash from an ATM. When that check or ATM transaction comes through your bank feed, categorize it to the same Owner's Equity account you used in the journal entry in the first transaction.
Much appreciated!!
Thank you Bebe for watching and commenting!
So I have a client that sometimes pays a payment on his business credit card with his personal checking account (not in QB). When I tried to enter it (2021 Desktop) it wouldn't let me put Owner's Contribution for the acct. It said I had to have a bank account for the transaction (I used the check register). I feel like I'm doing it wrong!.... any suggestions on how to fix this?
Thanks in advance,
Lisa
Hi, Lisa! Thanks for the question. That sounds correct that if you try to record a transaction within a check register, QB will be looking for a bank account to take the money from. In desktop, you should be able to create a journal entry under the "Company" tab. Once you pull up a blank journal entry, you can follow the rest of the video to record the payment from the personal bank account (still an Owner's Contribution) to the credit card.
What if I don’t want it to reflect credits? Can I delete that portion at the second row and hit save?? Please help 😅
Hi Gretchen and thanks for the question! In any journal entry, there must be debit(s) and credit(s) because QuickBooks Online uses double entry accounting. Before you can save the journal entry in QuickBooks, the total debits must equal the total credits. Otherwise, you will get an error message and QuickBooks won't save the Journal entry until they match.
If you tell me a little more about the transaction and what you're trying to do, I can help you get it recorded.
I hardly ever have cash transaction. So what is the best way to record a cash transaction for my business if I didn't' deposit it. Can i just do a journal entry and so owners withdraw and credit to service income?
Hi Patricia, thanks for the comment and watching the videos. Yes, creating a journal entry using the owners withdraw and service income accounts will work.
Hi.all expenses of the company were paid using the personal credit cards and later the company will pay back the owners. Will it be okay to use advances from owners as for the credit in the journal entry?
Hi, thanks for the question. You would record journal entries for the payments made on personal credit cards. The credit side for those entries would be the equity account like owner draw. If you reimburse through your company checking account, you could just categorize the transaction when it comes through your bank feed.
Good Video!
Can I Debit Amazon Seller Monthly Fee, and credit account payable to owner?
Thank you Inkstone! If you credit account payable to the owner, and assuming you set up accounts payable to the owner as a liability, you will be recording a balance the company owes to you the owner. When you pay yourself back for that purchase, you'll want to make sure you take that reimbursement to the accounts payable to the owner. Great question.
How do you catergorise a personal transaction? One not made with business intent eg paid for a concert ticket
Great question. You'll want to confirm with your tax advisor but when the transaction comes through your bank feed, you'll categorize as normal but instead of an expense account, you will use an Equity account like Owner's Draw or Owner's Distribution or Personal Expense (which would still be an Equity account). Ask your tax preparer exactly which equity account to use. This equity account will remove the transaction from your Profit & Loss so you aren't trying to claim a business expense for it.
What is I have a larger initial investment that I'm slowly paying back? Can I create a liability account and track that way? How would that be done?
Hi Tino, thanks for watching and thanks for the question. Is the initial investment payable to you or someone else? Is there any interest on the investment?
@@worldwidebookkeeping yes it's an LLC my wife and I run, no interest, we're just recouping out initial investment, ie, paying ourselves back. About 3k initially, followed by 1k per week +/-. We're writing checks to ourselves for this.
@@cpabrego Great, thank you for the info. You could set up the initial deposit into the company as Owner Investment (an equity account). Then as you write the checks for $3000 then $1k per week, you could take those checks to the Owner Investment account. The deposit builds up the equity account, then the checks decrease the equity account. Great question!
Hello when recording expenses paid with personal funds there is also gst included in expense, how do I record the gst
Thx
Hi Joanne! Since you called it gst, I'm not sure if you're in a country other than the US. I have no idea how other countries treat taxes. You'll probably want to confirm with your tax advisor how to treat gst, but here's what I do with sales tax in the US. I typically include the sales tax along with the rest of the purchase. If I spent $67.29 on office supplies and that amount includes sales tax, I put the entire amount of $67.29 toward office supplies.
Hi Joanne. I'm from Canada as well. I'm going to assume that you are HST / GST registered and submit for input tax credits. If so, for the example he used below, apply $67.29 to office supplies and then the tax portion $8.75 to your Paid on purchases HST tax account. Line 3 would be Credit to Shareholder investment for the total including tax $76.04.
Hope that helps.
@@denisehenderson5719 Thank you!
You don't say how to record the payback of that entry
Hi Greg, if you pay yourself back from one of the business bank accounts, that transaction will flow through the bank feed for that account. Categorize that transaction as an owner equity account or Owner Investment/Owner Distribution. Thanks for the comment.
@@worldwidebookkeeping thank you!
For paying back the owners what would be the best Journal entry?
So i have a Client that paid his Business Credit card with his Personal Account How can i handle this ? QBO
Sorry for the late reply, but assuming the business credit card is connected to QBO and importing transactions, the payment will show up in the list of transactions in the banking/transactions tab. You would categorize the transaction and use whichever equity account you are using to record owner contributions.