Hi John & Jaime - While it is great when two different users here have similar issues to discuss and resolve, as you know, we can only go so far down the generic path of options and answers that could apply to both but then they must diverge, since each are unique with different circumstances that apply to entities and this is one that can certainly go in many directions for best way to handle on a one-time or ongoing basis.
Unfortunately for small businesses there are several critical constraints to consider in each case, that when brought to light can change the answer completely so when we don't have all the facts, it is risky to guess. The scary part is that despite the complexity and risk for small business, they also lean towards frugality in most cases and accounting is the last thing they want to spend money on so they hire the cheapest help.
Fortunately in the case of these two companies, it looks like they both have reasonably smart bookkeepers who at least knew to ask for help and explained their situations very well and have been patiently trying to follow the discussion and recommendations here, which we all know have been over-complicated here in the effort to help them. I think everyone means well and wants to help and we are all in the same ball park.
The original posts of the questions, as precise as they were, skipped key component to be considered here which is first in my mind, which is entity type: C Corp, S Corp, LLC, Partnership, Sole Proprietors, and when LLC that expands to whether taxed as LLC or S Corp and for Partnership must consider % of ownership and this is all just the first question we need answered to even begin to advise on any accounting transactions.
Although both knew and said they were LLC's and that the AMEX sharing was maybe a one-time mistake, and I was impressed they were even able to reiterate each others' situations and understood differences and seemed capable of following and keeping their situations separate, when additional facts were noted as differences between them, the options for eac of them narrowed and not all facts were visible to all here.
Here is where I got stuck when clarification ended, which would impact the appropriate answers for each: At least one of the 4 LLC's discussed was not 100% owned by the one owner, which changes the options, and in one case it was not clear to me who paid AMEX for company B's purchases and if that was total bill so to complete transactions, we would need to know who benefitte from transaction and who paid to who.
In one case, company B paid company A's AMEX directly and there were costs benefitting both LLC's so those assets or expenses should ultimately be detailed on the books of the company who "kept the stuff." In one case, we had a computer and the other was travel expense (so asset for one and expense for other) but I think this got confusing with the suggestion of how to book the other side of the entry as asset too.
Where in my mind, part 2 of the entry is "financing" or exchange of cash between companies and AMEX, where asset and liability accounts may also come into play, but not to be confused with WHAT each had purchased and this is where the discussion got overly complicated and too vague to be followed further since now the two sides of the entry were both potentially referring to asset accounts and totally unclear.
Karen's excellent question on "Other Assets" perfectly pointed out how the vagueness of QB categories as used by QBT, just made this not possible for me to even follow what he was suggesting be done here so in my view, we had to resolve the Accounting required to be done before confusing with QB functionality and non-specific terminology, at which point we also had to consider what entries had already been recorded.
Fortunately both users seemed familiar enough with debits and credits so they could follow transactions as I had suggested for them and I was again impressed that each of them were wise enough to review those entries before they started making more entries into QB to complicate things even further on the books, so I think they both know how to work QB CC and other features properly to use as preferred or would ask.
So then the other big factor not clarified up front by users was whether they do cash or accrual-basis for their accounting since that is imperative to understand for the "financing" or cash side of these entries, which raises another gray area of concern since many QB users believe that this is just a checkbox in QB
that automatically converts between cash or accrual-basis and think there is nothing more to understand.
Since many small businesses on QB do cash-basis accounting, I first provided entries for cash-basis here.
Even though NONE of my own clients do since all are GovCon who are required to do accrual-basis only. So the "diagram" of entries I posted as a template to starting point for discussion, which I clearly labeled
as 'accrual-basis' were kindly re-posted by user seeking to use as template and requesting input on edits.
Unfortunately, the footnote that they were 'accrual-basis' was not brought forward in re-post, lead to yet another unneccesary critique that entries were incorrect and too many, both based on "basis" not being labled anymore and responder not knowing additional facts that had been discussed in a private emails and when I tried to point out so all knew there was more info than visible, the issue of 'privacy' came up.
As John mentions here, as we all know, small biz limitations may be cash flow or credit availability that is again unique to each company for how they must do things to make ends meet or in some cases that is
not an issue but rather a matter of convenience in the owner's view who may or may not understand why not to commingle or may just need to be educated on how to juggle to workaround their own situations.
Initial impression from both was that this was a one-time error to be recorded and then not repeated but
of course the discussion needs to go further to determine how matters will be handled going forward to either not repeat by getting separate CC or to put into place a process where the enities can support the other properly by having predetermined method of borrowing from each other as needed, the right way.
Lastly or more specifically unique to each is the business relationship beween the two entities where I got that detail from one of the users but not the other. This information helps determine what the accounting relationship is properly classified as overall, whether intercompany or whatever and is also part of how we decide how to to this one-rime correction and or set things up going forward to accomodate those needs.
So here we are, with two QB users seeking help on their AMEX sharing transactions they need to record. With about 5 accountants trying to help them on a QB website, which I think we all know should really be limited to how to use QB, but you can't advise on that without having further information from the users and even then the answer is only as good as the full information that was provided to answer it for them.
One of the early suggestions, was for them to discuss with their CPA, which is where usually that person is knowledgable about the company at a more specific level than we would be here and should be able to help the user with accounting decisions and usually with QB too, but that is another black hole of maybe where many companies don't have CPA or have lame one or bookkeeper and CPA never communicate.
Ultimately, this all falls on the owner who is responsible for all the business activity PLUS overseeing his accounting and taxes, whether he tries to do personally or via QB directly or using bookkeeper or CPA. Herein lies the biggest variable of all in my experience, and the hardest one to assume to understand, which is the combined knowledge about accounting and taxes between these 1-2-3 parties involved.
Even after all is said and agreed upon here as best way to proceed, we know that whomever posted here, may go back to the other 2 parties and they may decide to do something totally different anyway since we see it happen all the time, where they decide they know better and make up their own way to do things and then who knows, maybe it works out sometimes and they have no repercussions but I would doubt it.
This particular topic, for both QB users has to start with entity type and IRS requirements (Jaime expertise) and end with how to do on on QB (expertise from QBT or Jaime or perhaps others) but not me on either, but perhaps most important are the specifics in between about the company and the 1-2-3 relationships, which require more private discussions with individual companies and maybe some consulting advice.
SoI am going to bow out of this discussion as the non-expert on Tax or QB, which is what is needed here.
I recommended to one user to work with Jaime and was going to suggest QBT to the other QB user but just as he and I were discussing details of his unique scenario, there was another post that seemed rude and unhelpful so suggested Jaime again since I know how she works and she has helped me and clients.
One thing is for sure, if you try to run a small business based on free pieces of information that you try to scrounge up from various kind voluntary sources, that can be the most difficult way to run a business since that becomes the main thing the owner has to spend his time managing and I just hate to see that happen. Trying to do QB w/o accounting guidance from my view is just asking for trouble and I think most find that.
As mentioned, my main reason for coming to this website was for a few personal questions on my own QB that I use via my assistant/bookeeper for my own consulting business and I always keep an eye out for the Govt contractors here, since I know many of my clients started on QB and were misguided unknowingly, and then years later they find me and we have to od alot of work to sort out and fix, so nice to avoid that.
In my world of GovCon accounting, all of these issues also exist since proper accounting is prerequsite and the same IRS rules apply but are also audited and enforced by DCAA (Defense Contract Audit Agency) but certain things are much easier because they are already defined, such as accrual-basis accounting being a requirement for all so never a question there and when we follow the regulations for GovCon, IRS is easy.
The advantage of working with a unique aea of accounting and for so many years, is that you already know exactly what is required and exactly what will be audited and required to pass audit so there is no question about how things must be done. Good or bad, you don't have to guess the odds and weigh the risk of an IRS audit you may never see. For Govt contractors on CPFF contracts, they WILL be audited 100% for sure.
The only variable to consider risking, is when that audit will occur, hoping later vs. sooner, which is bad bet, and then on some rare occasions an auditor may miss something or be a total flake and you squeeze thru unscathed on the first round and are awarded a contract but then every year you must be aware that might not occur next time, so many business owners realize they can't sleep at night and so need to get it right.
