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If credit card payments are made from business account, but includes personal transactions, is it better to create journal entries to add expense and credit equity for business purchases or debit petty cash and credit the business checking for the card payment then credit petty cash and debit expense? Whatever is left in petty cash I can do a withdrawal or deposit to clear it. I want to leave a good audit trail of the transactions.
It's good to have you again in the Community forum, Salessio0564. It's nice to see familiar faces continuously participating in our discussions on best practices for managing business finances. Let me shed some light on this topic, as it's a common challenge many business owners face. Accurately recording business and personal transactions is crucial for maintaining financial clarity and compliance. I'll provide a more thorough explanation of the best practices to help you navigate this situation effectively.
First, it's important to emphasize that mixing personal and business expenses is generally not recommended. Ideally, business owners should maintain separate credit cards and bank accounts for personal and business use. However, I understand that sometimes, situations can lead to a mixing of personal and company expenses. When this happens, it's essential to have an organized approach to recording these transactions accurately.
You can create a journal entry to record these transactions. However, I'd highly recommend consulting an accountant or a tax professional. They have the expertise to help you in navigating the complexities of tax regulations and accounting standards. An accountant can provide tailored guidance to ensure your financial practices align with current legal requirements and industry best practices. Their input can help safeguard your business against potential compliance issues and optimize your financial management strategies.
Alternatively, we also have an option on how we can document this within your QuickBooks records. You'll need to record it within the system first. After that, you can reimburse the company. Let me guide you through the process of recording and rectifying this type of transaction.
The first step in managing a personal expense paid from a business account is to accurately record the transaction within the system. Proper documentation is essential for maintaining clear financial records and ensuring compliance with accounting standards. I'll show you how:
The second step involves reimbursing the company for personal expense. Repaying the company helps maintain the financial integrity of the business. It ensures that the business's financial records accurately reflect business-related expenditures and do not include personal expenses. Let me guide you on how:
I've added this article for more info: Pay for personal expenses from a business credit card or bank account in QuickBooks Online.
Remember, Salessio0564, maintaining clear and accurate financial records is crucial for the success and integrity of your business. If you have any further questions or need additional assistance, please don't hesitate to reach out to us by commenting below. We're here to support you every step of the way. Thank you for your commitment to maintaining best practices in your financial management. Have a great day!
So, let me see if understand correctly. The credit card payment debited from the checking account is categorized as as an expense and can be entered in owners equity?
Thanks for getting back to the thread, @Salessio0564. Allow me to provide more details on recording credit card transactions.
The steps mentioned by my colleague Erika_K are intended for recording personal expenses paid from a business account and reimbursing the company.
When you use Expense to record a payment, how it affects your records depends on the Category chosen during transaction entry. If you select an expense category, it impacts only the expense account, not the owner's equity.
The Owner's equity account will only be affected once you select it as the category when recording the expense transaction.
For accurate recording of your transactions, I recommend consulting with your accountant. Additionally, our guide on Mixing Business and Personal Funds in QBO can help manage these processes.
If you have any further questions about recording credit card payments that involve personal transactions, please feel free to ask. I'm here to assist you further.
It depends on what business entity type it is - sole proprietorship, 100%-owned S-Corp, etc. The personal cc transactions should be assigned to the appropriate owner's equity/shareholder distribution account and paid from the business checking account. The better way to handle this is to record only the business expenses in the business books and pay the amount of the personal cc transactions personally.
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