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Level 1

How to record business expenses paid with a personal credit card?

Hello, 

I am new to QB PRO 2017 and would like to know how to correctly record business expenses paid with personal credit cards, which was paid from my personal bank account. I have searched online and was not completely sure how to do it correctly. I entered credit card charges correctly in QB for many different items purchased. All these expenses incurred before business bank was opened. The company is a incorporated company. Let's say the total amount is $1,000. Can anyone please let me know step by step.

 Thanks

Solved
Best answer 03-11-2019

Best Answers
Level 15

How to record business expenses paid with a personal credit card?

Since you are a corporation, the amount you paid for expenses is a loan to the company.  Create either a liability account or a credit card account name due to [name] and post the transactions there (I would use the CC type account since it just makes transaction entry easier, but there will be other opinions)

Later the corporation pays you back

View solution in original post

27 Comments
Level 15

How to record business expenses paid with a personal credit card?

Since you are a corporation, the amount you paid for expenses is a loan to the company.  Create either a liability account or a credit card account name due to [name] and post the transactions there (I would use the CC type account since it just makes transaction entry easier, but there will be other opinions)

Later the corporation pays you back

View solution in original post

Level 1

How to record business expenses paid with a personal credit card?

Thank you very much!
Level 15

How to record business expenses paid with a personal credit card?

You're Welcome
Level 1

How to record business expenses paid with a personal credit card?

when the corporation pays you back how do you indicate to qucikbooks to settle this account/match? Basically I have say 10 transactions assigned to my CC account and today I decide to pay myself that amount from corporation to personal account using online banking. this shows as a sum of these 10 transactions i.e. 1 transaction of say 1000£ on my bank account. How do I indicate to quickbooks to match this with those 10 transactions? Or will quickbooks do it automatically? cheers
Level 1

How to record business expenses paid with a personal credit card?

I've read somewhere here you create a bank account with zero balance "Shareholder Account" for personal bank or credit cards. Both can be combined into the same account as they're not business related and meant to keep a total record. Any purchase would place the SH Account into negative balance until you pay yourself in the form of a transfer until the negative balance goes back to zero. This way you can add proper details and expense accounts when writing a check in SH Account. The idea is to keep the SH Account balance at zero unless you need to use the personal card for emergencies where you business account can't cover the expense. I think that's right,

Anonymous
Not applicable

How to record business expenses paid with a personal credit card?

My boss takes cash out of his personal savings. He says that he pays our subcontractors with this cash. I have no idea if this happens or not. He now wants to be reimbursed for these cash payments but doesn't want it to go through Quickbooks.  I am clueless how to do this but I feel it's illegal. He mentioned something about a creating a bill... 

Level 2

How to record business expenses paid with a personal credit card?

Queenie:

Ouch. You can try explaining that, for tax purposes, you need the third-party payment info in order to allocate the costs to expenses and record the GST (if any). Or ask him how he wants the payment presented in the year-end financials, and then work back to how to record the payment. Is there anyone to whom you can talk?

Creating a bill sounds "creative" and may pose difficulties for you as well as he in future.

But to answer your question, creating a bill will need a payee (him) and an accounting allocation (expense or equity?).

Level 2

How to record business expenses paid with a personal credit card?

Just another idea.  Tell the boss about the $600 / max / year / person requirement.  So, if he wants more than $600, tell him that he needs to provide names of payees, amounts, and related details (e.g., dates and reasons).  If any of the individual payments to contractors is greater than $600 then you'll need the contractor's tax info for reporting purposes.  Otherwise he'll need to count that money (> $600) given to him as personal income / owner's draw.  That way you don't need to "Cook the Books" for him. - Note, I'm not a financial adviser, just another small biz owner so take my advice with a grain of salt.

Level 15

How to record business expenses paid with a personal credit card?


@Anonymous wrote:

My boss takes cash out of his personal savings. He says that he pays our subcontractors with this cash. I have no idea if this happens or not. He now wants to be reimbursed for these cash payments but doesn't want it to go through Quickbooks.  I am clueless how to do this but I feel it's illegal. He mentioned something about a creating a bill... 


IF

if the company is a sole trader

1. enter his payment of personal funds as equity investment

2. enter his payment to the contractor from the bank 

3. to pay him back, write the check and use equity drawing as the expense (reason) for the check

 

If the company is an LTD

do the same as above but replace the equity accounts with a director loan account

Level 1

How to record business expenses paid with a personal credit card?

Also set up to receive a 1099, if over $600.  Will need W-9 form in your file for each individual who works for cash over the $600 limit.

Level 15

How to record business expenses paid with a personal credit card?


@CandCEngine wrote:

Also set up to receive a 1099, if over $600.  Will need W-9 form in your file for each individual who works for cash over the $600 limit.


OP is from Canada, they don't use the 1099, but I think there is a form similar to that they use, just do not know what it is called

Level 1

How to record business expenses paid with a personal credit card?

Hello,

 

I am so confused......

my boss has a personal credit that he uses for travel, job materials, hotel, etc.

he does not give me his credit card statements until few months go by. In the meantime he makes credit card payments from the business account for whatever amount he can afford.

he has me reconcile the checking account monthly so when I enter the payment made to the credit card company I expense it all under "job materias"

 

Does anyone have any suggestions?

thank you!

 

 

QuickBooks Team

How to record business expenses paid with a personal credit card?

Hello there, @mariahubert.

 

I can help share some ways to record business expenses with personal funds.

 

It isn't advisable to mix personal and business funds, however, there may be instances that will require you to do so. To record a business expense paid for by personal funds, you have to first record the expense, and then record the partner or owner's reimbursement for that expenditure.

 

To record a business expense that was paid for by a partner or owner's personal funds in QuickBooks Desktop (QBDT):

 

  1. Open your QuickBooks.
  2. Go to the Company menu.
  3. Click on Make General Journal Entries.
  4. (Optional) In the Make General Journal Entries window, change the Date field.
  5. The Entry No. should automatically populate. If not, type a number for your journal entries. QuickBooks Desktop will automatically number subsequent journal entries.
  6. On the first line, specify the appropriate expense Account for the purchase.
  7. Enter the amount of the purchase in the Debit column.
  8. (Optional) Enter a customer Name to associate the expense with a customer.
  9. On the second line, in the Account column, enter the Owner's equity or Partner equity ( if the account isn't listed, create the account).
  10. In the Credit column, enter the amount of the purchase.
  11. (Optional) In the Memo field, add Reimbursable to help you identify the transaction later.
  12. Select Save and close.

Once done, you can now record the reimbursement as a cheque/expense:

 

  1. Click on Banking at the top menu bar.
  2. Select Write Checks.
  3. Fill in the necessary information and select the Bank/Credit account you are reimbursing from (you can also use petty cash).
  4. Select Partner's Equity or Owner's Equity under the Account column.
  5. Enter the amount of the reimbursement.
  6. Select Save and close.

However, I highly recommend getting in touch with a professional accountant to record the transactions accordingly.

 

I'm also attaching these articles for additional guidance about mixing business and personal funds in QuickBooks. Just know that these articles are for QuickBooks Online (QBO) but the idea works the same with QBDT.

 

 

Let me know if you have any other QuickBooks or banking questions. I'll always be here available to help!

Level 1

How to record business expenses paid with a personal credit card?

Thank you so much Angely,

 

I will give it a try and cross my finger it works. It is just so confusing because the charges of the credit card do not balance to the payment amount made to the credit card company.

 

How do I account for that? for example if he has $1,000.00 of charges and makes $3,000 payment for prior balance that was due. - this goes back from 2016 and was never reconciled from the previous help.

 

thanks again

Maria

QuickBooks Team

How to record business expenses paid with a personal credit card?

Thank you for getting back, @mariahubert.

 

As you mentioned above, you use the checking account to enter the payment made to the credit card company and created expense transactions under job materials. To correct this and to show the payment to the credit card of $3,000.00, you have to edit the expense under job materials and change it to Partner's Equity or Owner's Equity for personal credit card created in QuickBooks.

 

Moving forward, you can then follow the steps provided above on how to record the reimbursement as a cheque/expenses.

 

Please feel free to leave a comment below if you have any other questions about the steps provided, I'm just a post away to help. Wishing you continued success!

Level 1

How to record business expenses paid with a personal credit card?

It makes total sense, I get it, the problem is that he does not reimburse himself through the business account .
 

He makes payments to the credit card from the business checking account and does not write a check to himself for personal reimbursement....

Sounds so complicated....
 
Thank you again for reaching out... I am more confused as ever. 
 
Maria 
QuickBooks Team

How to record business expenses paid with a personal credit card?

Hi, @mariahubert.

 

When writing a check in QuickBooks Desktop (QBDT) it doesn't necessarily mean that it is the actual check when paying the credit card from business checking. The write check feature is the way for QBDT to show that you have paid back the personal credit card. It may have different terminology name but it has the same purpose when recording payments.

 

As an alternative way, bank transfer can be used instead of writing a check.

 

To learn more about writing checks in QBDT, you may check this article: Create, modify, and print checks.

 

Keep me posted if you have any other questions. I'm still here whenever you need help.

Level 1

How to record business expenses paid with a personal credit card?

Does anyone have a video tutorial for this stuff?

Moderator

How to record business expenses paid with a personal credit card?

Thanks for joining this conversation, adchambers.

 

QuickBooks has an official YouTube channel where you can find helpful video tutorials on how to navigate the program.

 

You can find them here: QuickBooks.

 

We also have a specific video on how to record business expenses paid with personal funds. This is for QuickBooks Online, however, the concept is the same for Desktop. Check out this link: How to Record Business Expenses.

 

There are other QuickBooks users who also uploaded tutorials for this. You can go to https://www.youtube.com and enter "How to pay for business expenses with personal funds" in the search box.

 

Here's an article about business and personal funds: Mixing business and personal funds. This article is for Online, however, the information can be used for Desktop.

 

You can also check out the Firm of the Future site to learn more about product enhancements and tips to efficiently manage your business.

 

I want to be your direct point of contact so we can get this taken care of so please let me know if you have any questions.

Level 1

How to record business expenses paid with a personal credit card?

Hi guys,

The scenario describes a reimbursement of expenses which is not eligible for 1099. 

Level 1

How to record business expenses paid with a personal credit card?

I have a similar question. I have a client who just told me they have been putting business transactions on a personal card for years. Their previous Bookkeeper has been unresponsive for some time so they have hired me te help get the last few years caught up. My question is, how would I account for the business transactions made in a personal card for past years? Could I just total the amount for the entire year and pay him through the business account as a reimbursable expense? 

Level 6

How to record business expenses paid with a personal credit card?

Hello @SC44 

 

Create a credit card account in your G/L identified with the owner's name.  Enter all of the business cc transactions to this account.

 

For every business expense put on a credit card, whether it be personal or business, there must be a paper or electronic receipt/invoice, showing the items purchased and the applicable taxes.  This is the basis for any financial entry, Quickbooks or otherwise.

 

If someone is putting business expenses on their personal credit card and hopes to be reimbursed, they must provide you with these transaction receipts.  If they cannot, then you will have to go through every statement and identify which are business transactions.  You will have to enter them to the best of your ability, but just be aware that if you ever face an audit, a credit card statement is not considered to be a valid record of the expense (nor is a CC slip which is just an indication that a total $ amount was spent, not what it was spent on) and CRA may disallow the entire amount, or at the very least, disallow any ITC's that you would have been entitled to, had you had the proper receipt.

 

You have no idea what the taxes are on any transaction from a statement, and will have to take your best guess.  Sometimes there are items on a transaction that are not taxable, or have one tax but not the other, etc. which is not evident from a statement.  If you are in a non-participating province this is an issue.  If you are in a participating province, then you can work backwards from the total to get the pre-tax amounts as there should be one rate of tax on everything.

 

Once these are entered, you would write a cheque to the owner, using the credit card account as the account you are paying.  That will clear the balance.

 

Prior years can be a problem . . . is this a sole proprietor or a corporation?  If it's a sole proprietor, you technically will have to do a TD-1 Adjustment on his/her income tax for each affected year.  If it's a corporation you can probably enter everything in the current year as long as it's clear what the original years should have been (using the memo field or a Class or something).

 

Best of luck.

 

 

Level 1

How to record business expenses paid with a personal credit card?

If the entity was an LLC, would it be a owner investment instead of a loan?

 

By the way, thanks for all of your helpful responses on these posts.

Level 2

How to record business expenses paid with a personal credit card?

Depends on if it's a single-owner LLC or multi-owner.  In CA (don't know about other states), a single-owner LLC is treated all on the same tax return so it's all the same thing.  If multi-owner, the LLC can be treated like a corporation with separate tax returns for the biz and the individual.  I'm told that the Feds don't see a difference between a multi-owner LLC and a corporation . . . treated the same way.  We ran into this issue when we purchased an office building as a single-owner LLC and decided to change to a multi-owner LLC for more immediate tax advantages.  Again, I'm no tax pro.  This is just personal experience.