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robdownward
Level 1

Personal payment

Hi

 

A friend has paid money into my business account and I have paid them back.  They did this in error.  I have never been sure how to record this.  My concern is this will report as owner's equity, hence will be liable for tax.  

 

Thanks in advance

 

Rob 

Solved
Best answer May 29, 2020

Accepted Solutions
paul72
Level 6

Personal payment


@robdownward wrote:

Hi

 

They paid me via their personal account and I returned the money directly back to their personal account.


Hi @robdownward 

If you returned the money quickly (within a day or so) I wouldn't enter into QB at all.

If you have paper bank statements, simply make a note on the statement to the effect that it was a mistake & money returned to sender.

 

If you held the money long enough for it to make a difference to a reconcile (maybe in the account over a month/quarter end or across two bank statements) then simply log the money in as a Deposit & the repayment as a Cheque.

As the two will zero out, it doesn't matter too much which account you use.  Technically, the money is a Current Liability so I would use Other Loans account.

 

The only way you could be liable for tax on the money is if you held it over a Year End (across two Tax Years) but, even then, as it's entered as a Current Liability it would zero out when set alongside your Current Assets (i.e. Cash in Bank).

 

Hope this helps.

View solution in original post

4 REPLIES 4
Ashleigh1
QuickBooks Team

Personal payment

Hello Robdownward, 

 

Welcome to the Community page, 

 

Can we ask in real life where did you pay the money back out from to your friend?

Was it the same account that the money was paid into?

robdownward
Level 1

Personal payment

Hi

 

They paid me via their personal account and I returned the money directly back to their personal account.

Ashleigh1
QuickBooks Team

Personal payment

Hello Robdpwnward, 

 

 

 

This is more of an accountant question and we are not trained accountants, so we would advise you speak to one about this, you could record it as bank deposit and expense with NO VAT but as we have said already we are not trained accountants so we are not sure of the impact it will have on your accounts. 

paul72
Level 6

Personal payment


@robdownward wrote:

Hi

 

They paid me via their personal account and I returned the money directly back to their personal account.


Hi @robdownward 

If you returned the money quickly (within a day or so) I wouldn't enter into QB at all.

If you have paper bank statements, simply make a note on the statement to the effect that it was a mistake & money returned to sender.

 

If you held the money long enough for it to make a difference to a reconcile (maybe in the account over a month/quarter end or across two bank statements) then simply log the money in as a Deposit & the repayment as a Cheque.

As the two will zero out, it doesn't matter too much which account you use.  Technically, the money is a Current Liability so I would use Other Loans account.

 

The only way you could be liable for tax on the money is if you held it over a Year End (across two Tax Years) but, even then, as it's entered as a Current Liability it would zero out when set alongside your Current Assets (i.e. Cash in Bank).

 

Hope this helps.

View solution in original post

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