how to create an account for a shareholder as vendor when he/she pays for expenses. He/she pays ITC and the company wants to claim it from CRA

Hi soodabeh,  

You can track expenses paid by a shareholder by creating a liability account to represent the loan to the company. This allows the business to accurately document the amount owed to the shareholder while also ensuring that Input Tax Credits (ITCs) can be properly claimed from the CRA.

Here’s how:

1. Go to the Chart of Accounts.
2. Click the Account button at the bottom and select New.
3. Select Other Current Liability as the account type.
4. Click Continue.
5. In the Account Name field, enter "Due to Shareholder" or "Shareholder Loan."
6. Click Save & Close.

After setting up the liability account, create a dedicated expense account to classify the spending. This helps ensure all expenses associated with the shareholder's payments are correctly categorized. To record the transaction, use a journal entry to record the transaction and track both the tax details and the amount owed to the shareholder.

When reimbursing the shareholder, write a check and assign it to the liability account. This will settle the debt and record the payment in your books. 

For added assurance that your records are accurate and compliant when recording the journal entry, I recommend consulting with your accountant.

Please let us know if you have further questions. We’re here to help.