Personal funds journal entry

LLars · ‎December 12, 2021

I have two questions concerning personal funds used for business. When I first started my business I had to use my personal checking account to pay down my business credit card. I also used my personal credit card to pay for a few small purchases early on. I am now cleaning up my books and I am wondering if i'm handling recording these particular transactions correctly.

- Personal funds used to pay down the business credit card: Since I don't have my personal checking account attached to QBO I created a cash account titled "My personal checking". On the dates that I used my personal funds to pay on the credit card I entered a journal entry for the amount of that payment (Debiting "my personal checking" and crediting "owners investment"). Followed by another journal entry to record the payment on the business credit card (debiting "business credit card" and crediting "my personal checking") which brought the balance of "my personal checking back down to zero.

- Personal credit card used for business purchases: Again I added the personal funds to QBO for the exact amount of the purchase with (a debit to "my personal checking" and a credit to "owners investment") followed by recording the actual expense with (a debit to "the expense account" and a credit to "my personal checking")

I realize the importance of separating personal and business transactions however I just want to make sure I am capturing these correctly. To me this is a logical way to do this but worried I may be overthinking it. Any help is appreciated! TY

JonpriL · ‎December 12, 2021

Appreciate the details you've discussed, @LLars.

You're on the right track. Creating a journal entry is the correct method to record transactions affecting your personal and business accounts. The concept is to use the Owner's Equity account as the detail type to use in recording these journal entries.

I'm adding this article to learn more about how to pay for business expenses with personal funds: How to Record Business Expenses made with Personal Funds in QuickBooks Online?

However, I'd still recommend contacting your accountant for guidance in choosing the account category of your journal entry. They can also share the best accounting practice to follow considering the needs of your business in closing your books.

Use this link if you haven't found someone you can work with: QuickBooks Certified ProAdvisor.

You may also read all related references in this article to make sure your account register matches your bank and credit card statements: Use this Guide Anytime you need Help Doing or Fixing a Reconciliation.

If you have any other clarifications or follow-up questions about recording journal entries, please let me know by adding a comment below. I'll be here to lend a hand. Stay safe!

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Rainflurry · ‎December 12, 2021

Yes, nice work. Those journal entries are correct but it might be easier when depositing funds to record it as a bank deposit from the "owner's investment" account. Then, when paying the credit card, write a check. The journal entries work but it's good to get in the habit of using deposits and checks instead of journal entries.

View solution in original post

JonpriL · ‎December 12, 2021

Appreciate the details you've discussed, @LLars.

You're on the right track. Creating a journal entry is the correct method to record transactions affecting your personal and business accounts. The concept is to use the Owner's Equity account as the detail type to use in recording these journal entries.

I'm adding this article to learn more about how to pay for business expenses with personal funds: How to Record Business Expenses made with Personal Funds in QuickBooks Online?

However, I'd still recommend contacting your accountant for guidance in choosing the account category of your journal entry. They can also share the best accounting practice to follow considering the needs of your business in closing your books.

Use this link if you haven't found someone you can work with: QuickBooks Certified ProAdvisor.

You may also read all related references in this article to make sure your account register matches your bank and credit card statements: Use this Guide Anytime you need Help Doing or Fixing a Reconciliation.

If you have any other clarifications or follow-up questions about recording journal entries, please let me know by adding a comment below. I'll be here to lend a hand. Stay safe!

Rainflurry · ‎December 12, 2021

Yes, nice work. Those journal entries are correct but it might be easier when depositing funds to record it as a bank deposit from the "owner's investment" account. Then, when paying the credit card, write a check. The journal entries work but it's good to get in the habit of using deposits and checks instead of journal entries.

LLars · ‎December 13, 2021

Thank you @JonpriL ! Very much appreciate the help.

LLars · ‎December 13, 2021

Thank you @JonpriL ! Very much appreciate the information.

LLars · ‎December 13, 2021

This is good to know! Thank you @Rainflurry

AlcaeusF · ‎January 05, 2022

Hi @Rainflurry,

I have reviewed the solution you’ve shared and it's correct and accurate. Thank you for sharing your inputs to help address the issue.

We love to see members supporting one another! Have a great day.

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Personal funds journal entry