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accounts-johnmcc
Level 1

I am a sole trader. When I take money out of the business or pay for something that isn't a business expense, how do I categorise these amounts? Thanks.

 
2 REPLIES 2
CharleneMaeF
QuickBooks Team

I am a sole trader. When I take money out of the business or pay for something that isn't a business expense, how do I categorise these amounts? Thanks.

I'll help you track the transaction, accounts-johnmcc.

 

Although we recommend not mixing business and personal funds, we know it happens sometimes. When you use a business account to pay for a personal expense, let's record it as a check or expense record in QuickBooks. After that, you can reimburse the company. 

 

Here's how to record a personal expense from a business account:

 

  1. Go to the + New menu.
  2. Select Cheque or Expense.
  3. Choose a Payee from the drop-down menu.
  4. Select the Bank Account, Cash Account, or Credit Card you used to make the purchase.
  5. In the Category details section, click the drop-down menu to select the tax category that fits your need.
  6. Enter the Amount of the purchase.
  7. Click Save and close.

 

Once done, here's how to reimburse the company:

 

  1. From + New, select Bank Deposit.
  2. Select the Account to add the reimbursement to, then select the Date.
  3. Go to the Add funds to this deposit section.
  4. In the Received From field, enter the person who made the personal expense, then select the account.
    Tip: Add the person as a customer if they aren't in your books already. Even if they're not a customer, this is the best option.
  5. Select the Payment Method and enter the reimbursement amount.
  6. Once done, click Save and close.

 

To ensure the account and the entries are recorded accurately, I'd recommend consulting an accountant. If you don't have one, we can help you look for an expert through our Find an Accountant tool.

 

Additionally, I've added an article that'll help you review your accounts in QuickBooks to make sure they match your bank and credit card statements: Reconcile Workflow.

 

Please let us know if you need additional assistance tracking your transactions in QuickBooks. We want to make sure your books are accurate.

SME Bookkeeper
Level 4

I am a sole trader. When I take money out of the business or pay for something that isn't a business expense, how do I categorise these amounts? Thanks.

Hello @accounts-johnmcc,

Thank you for writing here.

If you wanted to draw money/pay your personal expenses from your business fund, you can do the following.

 

>Create a chart of accounts named "Director Loan Account" - Current Liability
>Categorize those transactions to the account that you draw from the business account.

 

Sole traders, and individuals in a partnership or LLP, don’t receive a traditional salary. They pay themselves by taking money directly out of the business. These are known as drawings. For this reason, it helps to have a separate business bank account for your self-employed income, and take money out of this at the times and amounts that suit you.

These personal drawings are counted as profits and are taxable at the end of the tax year. So remember to keep some money aside each year that you can use for paying tax.

For bookkeeping, assistance looks no further check my bio.

 

Thanks

SME Bookkeeper

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