Best way to record business expenses paid from owner’s personal accounts?

I have a client notorious for this despite my best efforts at education. When he does this I need him to bring me a receipt and I record the business expense with a proper receipt and then reimburse him money from the business. If he doesn’t want a reimbursement then I have told him it isn’t a business expense, it’s personal.  It’s challenging. The Zelle/venmo is the same way. I need to contractors bill. Then document (!) and record it as a paid bill to the 1099 contract when I reimburse his personal account. I do all this while I continually document that he need independent business accounts. I am sure others have ideas too!  I would love to hear how other people handle this. 

Hi, Mari and Northbound. As the funds didn't come out of the business bank account, you aren't reconciling these against bank transactions/feeds. Instead, you are recording the fact that the owner invested their personal capital into the business by paying for its expenses.

Since they're unable to provide the CSV files, the most efficient way to record these is through journal entries that credit an equity account. This category represents their personal funds. When entering, you can add a note of the source for documentation purposes.

You also mentioned that those transactions are related to independent contractors. Please note that journal entries do not automatically flow into 1099 reports.  However, since the payments were made via credit card, Zelle, and Venmo, they are not included on your 1099s. They are reported to the IRS by the financial institution rather than the business owner.

Keep me posted if you have any other concerns. I'm here to lend a hand.

Let me elaborate further.

We just found out yesterday that we’ll need to file for an extension. The client wants  to file by the end of April or the first week of May though we filed for an exention.

This is a newly formed company, and both the client and his wife have been reluctant to provide CSV files for personal credit cards, Amazon accounts, Venmo, etc. As a result, there are many unrecorded expenses and a large number of receipts that would need to be manually entered. Doing so would be very time-consuming and could jeopardize the deadline that the CPA and I are working toward.

Given the situation, would it be acceptable to record monthly lump-sum journal entries instead of entering each transaction individually? I’d prefer to avoid an excessive number of journal entries, so I’m considering shortcuts—such as grouping monthly bills and subscriptions into a single entry for this tax preparation and recording a corresponding journal entry for the total.

Yes, Mari. Recording monthly lump-sum journal entries would work, especially when source data is unavailable. Grouping them into a single monthly entry is a great time-saver. Just ensure that the CPA is okay with the level of detail. You can add a memo as well, indicating that the figures are consolidated.

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