How do I reconcile a personal credit card account with mixed personal and business transactions?

PPPV1 · ‎June 12, 2020

Hi, I am new to Quickbooks (a couple of months) and finding it challenging.

I started a business recently but made the mistake of using my personal credit card when I was doing the build-out for my space and for ordering equipment and supplies. Because there were so many charges on that particular card, I just linked it to my QBO account. I then went through all of the transactions and excluded any personal ones. I now have only business related charges showing on QBO. The mixed use transactions were paid in full every month from my personal account. I have not paid any credit card balances using my business checking. All of the business expenses are still sitting there in QBO as if I still owe them. My question is, how do I go about reconciling those charges and showing that I paid them using my personal checking account. I've been using a generic "company owes me" category for other expenses I've paid. But I know that when reconciling bank accounts, QBO wants you to type in statement ending balance, etc. However, since my transactions were mixed, those statements don't accurately reflect the business expenses. Is there any way to reconcile this so I can change that CC account inactive?

Thanks in advance!

Katie

JoesemM · ‎June 13, 2020

Thanks for getting back to us, @PPPV1.

You can create a journal entry to record the business expense you paid for with personal funds.

As mentioned by our Community backers, we don't recommend mixing business and personal expenses when doing business. To properly record it in QuickBooks, let's follow the steps below:

Go to the + New.
Select Journal entry.
On the first line, select the expense account for the purchase.
Put the purchase amount in the Debits column.
On the second line, select Partner's equity or Owner's equity.
Enter the same purchase amount in the Credits column.
Click Save and close.

Then, proceed to Step 2 in this article to process reimbursement: Pay for business expenses with personal funds.

For more details on how to handle business and personal funds, check out this article: Mixing business and personal funds.

However, I'd suggest consulting an accountant. They can guide you on what accounts should be used and provide more expert advice in dealing with this concern to ensure your book is accurate.

Once done, you can take a look at these resources to help you reconcile the account in QuickBooks Online:

You can get directly in touch with me if you have additional questions with recording personal funds or any other questions about QuickBooks. I'd be glad to help. Take good care.

View solution in original post

vpcontroller · ‎June 14, 2020

@PPPV1 wrote:

Sorry, I'm a single member LLC. So I actually don't care about getting "Paid back" for the credit card expenses I paid for from personal funds. I just want to be able to show that they are paid off somehow. That particular credit card was a cash back card and I use it for almost all of my personal expenses each month and then pay in full. So there are about $7700 in receipts from transactions attributed to the business that are still showing as due in Quickbooks. Is there a way to just show that that balance was paid off without it having to match a credit card statement? Should I change the "Company owes me" to "owner's investment" or something similar?

@PPPV1

"Should I change the "Company owes me" to "owner's investment" or something similar?"

Reclassify to Owner's Investment Equity type account.

View solution in original post

vpcontroller · ‎June 13, 2020

@PPPV1 wrote:

Hi, I am new to Quickbooks (a couple of months) and finding it challenging.

I started a business recently but made the mistake of using my personal credit card when I was doing the build-out for my space and for ordering equipment and supplies. Because there were so many charges on that particular card, I just linked it to my QBO account. I then went through all of the transactions and excluded any personal ones. I now have only business related charges showing on QBO. The mixed use transactions were paid in full every month from my personal account. I have not paid any credit card balances using my business checking. All of the business expenses are still sitting there in QBO as if I still owe them. My question is, how do I go about reconciling those charges and showing that I paid them using my personal checking account. I've been using a generic "company owes me" category for other expenses I've paid. But I know that when reconciling bank accounts, QBO wants you to type in statement ending balance, etc. However, since my transactions were mixed, those statements don't accurately reflect the business expenses. Is there any way to reconcile this so I can change that CC account inactive?

Thanks in advance!

Katie

@PPPV1

The way you're mingling business expenses and excluding personal expenses, you will not be able to reconcile the credit card statement because full transactions are not recorded in the register. The best way to resolve this is to pay-off the "company owes me" liability account at some point (or move the balance to equity account) and not focus on reconciling the account. I hope this helps!

Teri · ‎June 13, 2020

@PPPV1

Nice mess but very common. To anyone else here, if you mix these up, don't link to QB until you split up.

I assume you now know that you need to split these up, best to use two different credit cards & accounts.

In order to determine how best to correct this, need to know how you must post the personal expenses,

this depends on your entity type /filing taxes. Are you Sole Proprietor, C Corporation or S Corp?

Need this to replace account "company owes me" with a proper account and what entries to make.

Just saw you said this is personal CC, so agree with vpcontroller, one way is to pay off and start clean.

Might look at how much is business vs. personal to help you decide. The personal amounts all need

to be paid to you or invested in equity of the company. You might want to get professional help here.

PPPV1 · ‎June 13, 2020

Sorry, I'm a single member LLC. So I actually don't care about getting "Paid back" for the credit card expenses I paid for from personal funds. I just want to be able to show that they are paid off somehow. That particular credit card was a cash back card and I use it for almost all of my personal expenses each month and then pay in full. So there are about $7700 in receipts from transactions attributed to the business that are still showing as due in Quickbooks. Is there a way to just show that that balance was paid off without it having to match a credit card statement? Should I change the "Company owes me" to "owner's investment" or something similar?

JoesemM · ‎June 13, 2020

Thanks for getting back to us, @PPPV1.

You can create a journal entry to record the business expense you paid for with personal funds.

As mentioned by our Community backers, we don't recommend mixing business and personal expenses when doing business. To properly record it in QuickBooks, let's follow the steps below:

Go to the + New.
Select Journal entry.
On the first line, select the expense account for the purchase.
Put the purchase amount in the Debits column.
On the second line, select Partner's equity or Owner's equity.
Enter the same purchase amount in the Credits column.
Click Save and close.

Then, proceed to Step 2 in this article to process reimbursement: Pay for business expenses with personal funds.

For more details on how to handle business and personal funds, check out this article: Mixing business and personal funds.

However, I'd suggest consulting an accountant. They can guide you on what accounts should be used and provide more expert advice in dealing with this concern to ensure your book is accurate.

Once done, you can take a look at these resources to help you reconcile the account in QuickBooks Online:

You can get directly in touch with me if you have additional questions with recording personal funds or any other questions about QuickBooks. I'd be glad to help. Take good care.

Teri · ‎June 13, 2020

As an LLC, you must select the basis you use for taxes, your choices are:

- Sole proprietor

- C Corporation

- S Corporation

- Partnership

Each have different tax requirements for how you account for personal expenses.

Teri · ‎June 13, 2020

The reason you become an LLC in the first place is to protect your personal assets from business liability so for example if your business ever gets sued, they can only take your business assets (bank account money, computers, etc.). By co-mingling business and personal assets as you have, that is called piercing the veil of the company, making it so that if you get sued, they can take your personal bank account, home, car, 401k or whatever you have because YOU have implied by your accounting that you and your business are the same entity. Accounting 101.

vpcontroller · ‎June 14, 2020

@PPPV1 wrote:

Sorry, I'm a single member LLC. So I actually don't care about getting "Paid back" for the credit card expenses I paid for from personal funds. I just want to be able to show that they are paid off somehow. That particular credit card was a cash back card and I use it for almost all of my personal expenses each month and then pay in full. So there are about $7700 in receipts from transactions attributed to the business that are still showing as due in Quickbooks. Is there a way to just show that that balance was paid off without it having to match a credit card statement? Should I change the "Company owes me" to "owner's investment" or something similar?

@PPPV1

"Should I change the "Company owes me" to "owner's investment" or something similar?"

Reclassify to Owner's Investment Equity type account.

PPPV1 · ‎June 15, 2020

Thank you for the responses. Understood. I will not be mixing them in the future.

PPPV1 · ‎June 15, 2020

Thank you!

PPPV1 · ‎June 15, 2020

Yes, sole proprietor/single member.

MorganB · ‎June 15, 2020

I'm glad to see you received the assistance you needed here in the Community, PPPV1. The Community has your back if you ever need a hand again in the future. Take care!

Topics

Training

Community

Resources

How do I reconcile a personal credit card account with mixed personal and business transactions?