Business expenses paid via personal account

by Anonymous

I am trying to set up a small company in quickbooks. The company has been in business for about 2 months.

When the company first started they had not set up a bank account for the business. Supplies were paid for through their personal bank account or by cash. How do I show those bills as paid without them going through the company bank account?

Jennifer replies:

In order to record business expenses paid via personal accounts, it all depends on how the company is structured. Sole proprietors, partnerships, and corporations are all handled a little differently.

There are other ways, but here's how I would do it for each type. First I would collect all of the receipts. Then I would open the General Journal.

For all types, I would always debit the expense account for the expense, and use the date shown on the receipt. I assume no inventory was purchased. If inventory was purchased these instructions will not give accurate results.

In the Description area, I would enter the method of payment, and also the last four digits of the credit or debit card if one was used. If a paper check was used, I would include the check number.

For the credits...

For sole proprietors.... credit the Investment account. It's located in the Equity section. Create one if it's not already there.

For partnerships... credit each partner's investment account according to who paid what. If the investment accounts are not there, create them. They are Equity accounts.

For corporations, I suggest you credit a Shareholder Loan account. If you don't have a Shareholder Loan account, create one as an Other Current Liability (or Long Term Liability if the balance will remain there for over a year). If there is more than one shareholder, create subaccounts for each shareholder. Credit each according to who paid what.

I hope this helps you understand how business expenses paid via personal accounts are recorded. Let me know if this was helpful by posting a comment below. Thanks for writing.

Comments for Business expenses paid via personal account

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Jan 06, 2012
What about this case? NEW
by: MS

I purchased an item for my sole prop. online. Payment was thru Pay Pal. Afterwards realized that my personal credit card was used in Pay Pal, not my business card.

I would like to record the transaction as a bill from the vendor then pay it, so I can keep up with all the business I have done with this vendor. But if I record the bill, QB won't let me use personal cash as a payment source in pay bills. And if I use the general journal the payment doesn't get matched with the bill/vendor.

Please help.

Mar 13, 2012
Solution to QB Vendor Bills Paid Via Personal Accounts NEW
by: Anonymous

For vendor bills recorded in QB paid via personal accounts:

Record the payment:

1. Company > Make General Journal Entries.
2. Debit Accounts Payable.
3. Note the Bill # and payment method (personal account) in the Memo.
4. Enter Vendor Name.
5. Credit Owner's/Shareholder's Equity account.
6. Enter Owner's/Shareholder's name.
7. Save and Close.

Apply the payment:

1. Home > Pay Bills.
2. Check the box next to the bill to be paid.
3. Near the bottom of the window, Total Credits Available should contain a non-zero dollar amount. Click Set Credits.
4. Check the Journal payment transaction you just recorded and click Done.
5. If the bill was not paid in full, be sure the Amt. to Pay column is $0.00.
6. Click Pay Selected Bills.

Print this out and add to your notes.

Hope this helps!

Mar 13, 2012
When and how do you clear the new Shareholder Loan account? NEW
by: Anonymous

When and how do you clear the Shareholder Loan account?

Thanks in advance for your response.

Mar 13, 2012
Thanks! NEW
by: Anonymous

Thanks for the thorough explanation!

Oct 02, 2013
Personally Pd Bills in QB Pro from March 2012 NEW
by: Kathy

Thank you for your help with this one! This worked wonderfully and the records are now up to date!

Oct 02, 2013
Personally Pd Bills in QB Pro from March 2012 NEW
by: Kathy

Thank you for your help with this one! This worked wonderfully and the records are now up to date!

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Business expenses NEW
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