How do I handle clients historical expenses charged to their personal accounts instead of the business account?

Hi maureenorman,

Thanks for reaching out here.  QuickBooks Online has taken into consideration that this type of transaction can take place.  Although using personal funds for business transactions isn't highly recommended, I'd be glad to assist!

The first step for this type of entry is to record the business expense that was paid with personal funds.  Here's how;

1. Go to your Dashboard from the left menu and make sure you're in Accountant view

2. Select +New from the left menu and then Journal Entry

3. On the first line, choose the expense account for the purchase 

4. Enter the amount of the purchase in the Debits column

5. Select Partner's equity or Owner's equity on the second line

6. Enter the same purchase amount in the Credits column

7. Hit Save and close

You can choose one of the following methods to reimburse the funds.

Option 1;  As a cheque

1. Select +New and then Cheque

2. Choose the bank account to reimburse the personal funds

3. Select Partner's equity or Owner's equity in the Category column

4. Enter the amount to be reimbursed

5. Hit Save and close 

Option 2; As an expense

1. From +New, select Expense

2. Choose the bank account to reimburse the personal funds

3. In the Category column, select Partner's equity or Owner's equity

4. Enter the amount of the reimbursement

5. Hit Save and close

Here's a helpful guide for future reference.

Please feel free to reach back out if other questions come to mind.  We'd love to help!

Thank you so much for this! I switched all the expenses to journal entries but have one more question. How do I record the tax? If I include it in the debit transaction, and then also as a credit, then doesn't that mean the tax won't be a part of GST paid and therefore not recoverable? Doesn't it just bring tax paid to zero? 

Thank you!

Maureen

Glad you reached out to us again, @maureenorman.

I'm joining this thread to share some more information about this tax concern.

If you want to record your tax, you can simply create a sales tax adjustment in QuickBooks Online instead of a journal entry. This will help report the taxes correctly on your reports. 

1. Click on Taxes, select Sales tax, and select Prepare return under the Filings section.
2. On the Prepare return page, select the Adjust link on the far right of the line you wish to adjust.
   
3. Add the amount of tax you would like to add to the line (to reduce the line, enter a negative number).
4. Pick an adjustment account. This may be an income account for tax credits, or if your Tax Payable account is correct, you can select the Payable account to adjust the return without affecting your Chart of Accounts.
   Note: We recommend consulting an accounting professional to ensure correctness on this step.
   
5. Press Save to save the changes.

I've also prepared several key links to help you understand the process:

• Adjust sales tax
• Adjust sales tax liability
• Create or delete a sales tax adjustment

Don't hesitate to come back here if you need more assistance with the adjustment. I'll be right here to help any time.