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Level 3

Re: Need help with a QuickBooks entry

qbteachmt: My original post was to recommend creating an intercompany loan situation to record the entries. I felt that this would resolve both scenarios posted for the credit card payments. It could also serve to resolve any other payments made by one company on behalf of the other, especially if one company has more available cash than the other. I see this happen quite a bit with new companies created by the same owner. As long as there is a detailed written agreement between the two companies to document the process used for recording these transactions, it should be able to stand up to an audit. This would also meet arm's length requirements as well and wouldn't require the use of Equity or Asset accounts. It's just simple entries back and forth. There is no duplication of expenses on either side, there are no false accounts created, and it keeps the CC balances in line with the statements.

 

As you pointed out, it depends on the text being used for teaching the course, that is correct. In my teaching experience, there are several college textbooks, not published by Intuit or Sleeter, that provide instruction on both JE and the QB functions. I would always teach my students how to use both methods because I felt it was important for them to understand the debits and credits going on in the software so that they could identify and fix issues if they occurred. I find that too many people rely on the QB functions to post entries and they never really understand how the accounting works in the background.

 

I don't need to try posting JE's to be able to create accrual or cash basis entries. I do it every day and have no problems with it. If you understand what these two accounting methods mean, then you know that it has nothing to do with using special buttons in a program, regardless of the program used.

 

JE's are debits and credits, so I'm not sure why you disagreed with me on that one... or why relational databases came into the conversation. Again, I'm not saying you should just bypass all of the tools/functions that QB provides, but it's also not impossible to post entries as JE's either if you know what you're doing. I use JE's for posting payroll entries all of the time. I don't use QB Payroll though. Every business user is going to use the system differently, so it's not a one-size fits all situation on how to post accounting entries. 

 

People who think that QB is doing the accounting for them, and they dont need to know accounting are fooling themselves. I've audited many businesses who think this way, and I've dealt with many so-called accountants who think this way. Every time I've encountered those who think this way, I've found errors that have to be resolved because the user didn't understand basic accounting functions. They didn't know how to recognize an error when one occurred, and if they did recognize an error, they didn't know how to fix it. Too many people are relying on a system to do their accounting for them, with no accounting knowledge themselves. Intuit isn't going to be responsible for bad entries made by the end-user though. The IRS and other government agencies aren't going to care what software you used when your accounting data is wrong. The bottom line is that QB functions are great and helpful, but the user should still understand what is going on in the background, they should know where debits and credits should appear in their GL and Journal, and they shouldn't have to rely on QB's tools to do accounting for them. It makes things easier to have these tools, but it's not a defense in court when your GL is a mess because you relied on the software to be your accountant.

 

 

Level 2

Re: Need help with a QuickBooks entry

@qbteachmt

 "1a. Enter Credit Card Charge by Company A, as Other Asset."

 

Thank you for helpful instructions. I'm bit confused, why are you recommending "Other Assets" account to record credit card related transactions?

Level 15

Re: Need help with a QuickBooks entry

"why are you recommending "Other Assets" account to record credit card related transactions?"

 

Company A's credit card was "used by someone else" so that is Other Asset = Loan to this other entity. Company A is not incurring an expense. They are More In Debt because their Credit line was used for a purpose that is not theirs. That means Company B needs to Repay Company A (directly or directly, as we have seen in this topic). That is why this is not a P&L event and is on the Balance Sheet as Other Asset.

 

The other option would be Equity. The Person that Used the credit card can be considered "personally benefitting" by using a Business card, which might qualify as Owner Draw or Distribution.

 

This is why you should not commingle, and this is why you should ask your own CPA how to handle these events.

Level 2

Re: Need help with a QuickBooks entry

@qbteachmt

 

In QuickBooks, "Other Assets" type is considered as Long-Term Assets on the Balance Sheet like Goodwill and Long-Term Notes Receivable. Instead, Can I use "Other Current Assets" account which seems like right asset type for someone owing on credit card transactions?

 

 

Level 7

Re: Need help with a QuickBooks entry

To anyone following this thread, good for you if you made it this far and let me try to clarify/simplify here.

There was a great question posted by a QB user on his two companies commingling costs on AMEX CC.

Got better when 2nd QB user added his almost same situation / question to this discussion and then we had a few experienced accountants and / or QB experts provide and discuss guidance on how to do.

 

 

The two QB Users impressed me since they were able to clearly and concisely summarize the information they provided and even reiterated good summary of each others' situation as they were both following all.

I was also impressed they both were able to recognize similar scenario and were able to add theirs here to make great discussion with a few differences that could have both been addressed at the same time, but

 

Unfortunately, on the answering side, egos apparently got in the way turning this into **bleep** fight adding to client confusion and at the same time, client information provided was not quite complete so come to find out there are many key differences between entities which make the correct answers different in the end, and not all of these facts are in this thread since they were discussed in private emails without all parties.

 

However, that is the nature of the beast to understand, which is that each company has their own unique 

set of circumstances which dictate what is correct procedure for them and so to try to make decisions for your company based on generic information shared online is very risky without the follow-up to confirm

by either reading and understanding IRS and/or QB details or having a trusted expert to confirm YOURS. 

 

So here we are now with a thread that is too confusing even for original parties to make useful now as it is

commingled with BS arguments on the QB quirks to work around vs. actual key content to be understood 

FIRST!  Ideally this discussion could also be useful to other users but I think that has been destroyed now, but I can summarize where this is at for both original companies based on our private email discussions.

 

I see this nice lady Karen is trying to follow along and has brought up another great point I just replied on, but let me explain why these two cases have diverged so much now leading to differen correct answers but for each of the first two QB users who asked and have patiently been following this to try to get to the right answer despite the BS flowing in between, which has made this much harder for them to see what matters.

 

 

Level 7

Re: Need help with a QuickBooks entry - Huge Wow and Thanks to QBT!

I would like to share huge WOW and sincere thanks to QBTeachmnt who I have seen here for years and sparred with as provoked at times.  Yes, I know this is not CHAT as I am using it so save your breath QBT.    

I see you have responded to over 88k posts here.  I am totally impressed and give you my honest WOW!

No doubt you have helped thousands of people here, which I truly admire since I do very similar work.

 

However, even so, you do not know everything and are not the only one who can help people here and as I have told you many times, I am not here to steal clients from what you clearly see as YOUR own fish pond. In fact probably 98% of companies here are not clients that I would even work with since not the right fit as I work with a specfic group of clients as you know, which are only Govt contractors, who you can't help, ok?

 

I know you have issues whenever I come here, get over it.  I know you want to argue everything I post here, grow up.  I know you hate it when I bring up posts that you consider too old for discussion because you do not grasp what I have explained about the GovCon accounting audit cycle which may span up to 7 years so things that are a year or more old can still be corrected to save the contractor from audit that is coming up.

 

So get over yourself and try to see the bigger picture and purpose here is to help QB users with questions and that arguing with others trying to do the same benefits no one and I mention this here and now since this thread is a perfect example of this that has gotten way out of hand and has been confirmed in my view since you reacted the exact same way to new person who joined this thread so I can see it is you, not me.

 

Yesterday, we had Jaime Finfrock join this discussion and add her input but rather than being able to see another view and further explore the QB user needs, she has also had to waste her donated time to reply 

to your badgering every word said regardless of right or wrong.  While this was going on, wasting time, I received private emails from one of the QB Users, who clarified his specifics and you need to understand.

 

These two QB users have differences that are significantly relevant and each will require unique solutions.

Solutions have been suggested here based on a mixed bag of information between the two QB users so

once sorted out, I think you will see that nothing provided here so far gives either one of them all the info they need to proceed with this on their own without further guidance or assistance on their specfic needs.

 

So that being said...I will continue for anyone following...

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 15

Re: Need help with a QuickBooks entry

It is an Other Asset, because it does not relate to regular Business activities. If you want to use "Current" for this, that is fine. The point is: Asset.

Level 15

Re: Need help with a QuickBooks entry - Huge Wow and Thanks to QBT!

"I see you have responded to over 88k posts here"

 

I don't even know what you are looking at, but perhaps this is what it means: I believe you might be seeing some sort of Forum(s) statistic, and since I have been participating with Intuit since 2007, so that number might be explained by over 10 years and Lots of other software and Forum platforms, with the data carried over.

 

"I am not here to steal clients from what you clearly see as YOUR own fish pond."

 

I don't know what you think this is. All of the iterations are Peer User forums connected from internal to the Programs, the past 5 years or so, by opening Help from Within the QB desktop programs. Believe me, you are not Stealing any clients from me. I have been turning them away for years, as I have been plenty busy.

 

You seem to have some insight to share into why I am here, but you never asked Me. I am here as a peer user. I learn from all of the Intuit forums where I participate, as I am an end user and have clients with "developing" issues that show on the forums when others start to see issues. I learned from all of my students, as well. Because No One can know everything about everything, and I am the first to admit we all learn from those willing to be Helpful.

 

I also learned Programming. When I offer methods for QB, it is because I know how the change to a Relational Database in 2007 affected these tasks and the reporting. Also, since I get Paid to fix things, I am pretty familiar with how people Break them. And teaching 12 or more class sessions every year for 9 years means I got to see how students Make their errors, real time. This is theory.

 

Using JE for anything in this topic is a perfect example. A topic gets started by someone having difficulty with the way a JE isn't working for reporting or tracking purposes. Everyone who posts to that topic about How to make a JE work, is overlooking the one fact: It already isn't working for that person.

 

I am as saddened as anyone that this topic got off track and out of control. It never had to be this way, which I observed days ago.

Level 7

Re: Need help with a QuickBooks entry - Jaime Finfrock

Jaime Finfrock of finfrocktax.com joined our discussion yesterday as mentioned with her excellent input.

Jaime is a former IRS auditor who was promoted to DCAA auditor and recently left her job at Blue Cross Tax department where she worked on my two least favorite areas of taxes and health insurance, she is total masochist. She now works full-time for her own business where she has done income tax returns for years, has GovCon consulting clients and teaches QB at her local college and still does tax consulting for BCBS.

 

Jaime is someone I met a few years ago and have worked very closely with as she does taxes for my S Corp and Personal and same for most of my clients and they all love her.  I think her best quality, hard to choose, is her excellent skill at explaining things, in particular for me, are income tax things since I HATE tax work. Point being , she is smart, knows QB and Tax, and I highly recommend her to anyone and I do all the time.

She is also not here to steal QBT's clients, like all 3 of us, we like to help people and that is real goal here.

 

If that results in getting a new client, great, of course we all love that, but most important is the right match.

From this particular discussion, one of the two QB users contacted me directly via email and so discussion of his scenario has gone offline from here, and after we discussed a bit further, I have recommend since his greatest need is on the Tax side and QB is second, I suggested that he should work with Jaime, not me and that is moving forward outside of this discussion since the scenario differs from the other one posted here.

 

Level 2

Re: Need help with a QuickBooks entry

I was wondering if you all would be open to using a diagram to outline your QB steps as a final step/solution to your previous explanations.  Personally, it's a bit difficult trying to decipher, interpret/translate from paragraph form explanations into a step-by-step process.  Below is a copy of Teri's diagram as reference to start with.  Feel free to edit, change, delete, add based on your final solution.  Thank you so much! 

 

 

Added description of each entry in red to explain entry.

Item 1 is recording Expense/Assets for AMEX purchases.

Item 2 is recording Cash entries between A, B and AMEX.

 

Company A:

1a)  Debits Expense or Asset for AMEX purchases    $700*

       Credits CC liability account for AMEX purchases $700

      To record Expense or Asset  bought on Co A's AMEX

 

1b)  Debits current asset:  "Amount Due from Co B"   $300

       Credits CC liability account for AMEX purchases  $300

      To record Co B purchase on Co A's AMEX to be re-paid

 

2a)  Debits CC liability account for AMEX purchases  $1000

       Credits Current asset "Amount Due from Co B"     $300

       Credits Cash/Bank account for AMEX payment      $700

       To record payment to AMEX and payment from Co B

 

Company B:

1c)  Debits Expense or Assets for AMEX purchases   $300*

       Credits Current liability "Amount Due TO Co A"  $300

       To record Expense or Asset  bought on Co A's AMEX

 

2b)  Debits Current liability "Amount Due TO Co A"  $300

        Credits Cash/Bank for amount paid to A’s AMEX $300

        To record payment to AMEX  as repayment to Co A

Level 15

Re: Need help with a QuickBooks entry

Teri, why are you making this personal? "She is also not here to steal QBT's clients, like all 3 of us, we like to help people and that is real goal here."

 

I even Referred clients to you in the past! If you are not willing to Network, just tell us to Stop Making these referrals. Sheesh. You seem to find this networking Competitive, not Cooperative?

 

"I was wondering if you all would be open to using a diagram to outline your QB steps"

 

Step 1. Company A uses Enter Credit Card Charge, posting to an Other Asset account of some sort, for the amount that is spent on behalf of another party.

 

Step 2. Company A enters a Credit Card Credit to show the other party made a payment against that account's running balance directly to AMEX, and posts this as Other Asset = shows they got repaid indirectly. Company A is now ready to make their own credit card balance payment as they always do it.

 

Step 3. Company B Paid for what was bought on their behalf by their Payment to AMEX, so they can simply List that "expense" on the payment entry to AMEX.

 

Three Steps.

Level 7

Re: Need help with a QuickBooks entry

Not clear who you are quoting below.  We are all trying to make this a group discussion to benefit others.  

I have received multiple private emails, including both QB users who are trying to escape this childishness.

 

The QB user has requested to follow the starting example template that I posted here, but you can't listen.

Your steps below have mixed together two different company situations are not correct or complete or clear.

 

Level 7

Re: Need help with a QuickBooks entry - Reply to nfbroadwick

Hi nfbroadwick -

Thank you again for the kind words here and in private email and good for you for persevering in trying to help others here as well by sharing your situation Q&A.  Thank you also for promoting my "diagram" which I posted as a template, hoping we could all see the Q&A for both of you QB users so we can all learn more.

 

Sorry, I see the red and blue noted does not show in this B&W post that I see, so why was that an option on the input side I will never understand, but there is much logic in QB that I will likely never understand since most cannot be explained when you ask so I add to a list of QB unknowns and move forward to next item.

 

 

Level 7

Re: Need help with a QuickBooks entry - TW Reply to QBT # 52 or so on this thread

To make clear for QBT or anyone else unclear, these are NOT QB GENERAL JOURNAL ENTRIES, these are called ACCOUNTING ENTRIES, which are the same in every accounting system, always include debit/credit and are always visible in your GENERAL LEDGER on every accounting system, and have been for centuries. 

 

QBT, before we can tell user which buttons to click in QB, we must know what they are trying to achieve.

The mechanical instructions (on any system) should follow the "accounting" that we are trying to do here. You must know this since you do this work, so not sure why you are arguing with every post made here. 

 

QBT, I know debits and credits are hidden in QB to make the system appear more user-friendly to the

non-accountants and business owners.  That is a whole different topic I could argue for years and I have.

Debits and credits exist in QB and work the same as anywhere in the standard universal accounting job.

 

QBT, Why am I making this personal?  Cuz you are the only person here who is arguing with what I say.

This is not helping me, or you, or anyone else that I can see, but seems to be out of control so suppose we must just ignore that side noise and proceed here vs. hoping you might cooperate and contribute here.

 

This thread is now over 50 posts, and if you look you will see the majority are from you and your 'issues'.   As I started to say earlier, you are preaching to the choir on accounting functions vs. JE's since having worked on multiple accounting systems for almost 4 decades, please rest assured I know the difference.  

 

Can we get on with discussion or is there more you must argue at this point? 

Level 2

Re: Need help with a QuickBooks entry

I spoke with my CPA and told me it's wrong and never to use "Other Asset" type account for credit card related transactions. Use "Other Current Asset" type account in QuickBooks. On the Balance Sheet, all the asset types are the not same, they've different financial meaning.

 

I then Google myself and learned the difference between "Other Current Assets' type account and "Other Assets" type account on the Balance Sheet. Yes, it's an error to use "Other Asset" as suggested here.

Level 3

Re: Need help with a QuickBooks entry

 

As has been stated in a previous post, there are many ways to resolve accounting issues, and you can often get many different answers to one question because everyone has their preference in how to do something based on their own experience. There is rarely just one single way to handle a scenario like this, so it is important to consider the specific factors in each set of companies to choose the best option for each company.

 

If there are tax implications in these entries, a tax professional should be consulted to discuss the most appropriate way to post these entries based on the tax structure of each company in each scenario.

 

In the end, I think we all provided very similar suggestions though... creating a loan or payable between companies. We just all had different ways of going about it. Another method that I believe was mentioned was to use equity accounts, which is also an option, depending on the company's circumstances and tax structure.

 

Getting caught up in the back and forth of JE's, debits/credits, or who has what experience doing what has made this even more confusing, so hopefully we can all move past that now and focus on providing a solution while recognizing that we each have unique experiences that provide different POV's.

Level 7

Re: Need help with a QuickBooks entry - Kudos to Karen

Hi Karen - 

Love to help people trying to learn. Good for you for following through on this.  You are absolutely correct.

This is one of those accounting things that is universal, meaning applicable in Accounting so not just in QB.

If I knew how to attach files here, I would share a nice diagram illustrating this, but here is quick summary:

 

Assets 

Current (or)

Non-current

 

same as:

 

Assets

Short-term

Long-term

 

Current/Short-term = Less than 12 months to convert to cash

Non-Current/Long-term = More than 12 months to convert to cash

 

In the context we are discussing, Credit Cards are always paid within 12 months = Current Assets.

Loans (Notes) might be short or long-term, depends on the loan agreement and when total is due. 

Intercompany is usually Long-term since you typically have a balance for the life of the company.

 

Assuming that made sense, here is the hard part in my opinion, you often see like this on Finanicials:

 

Current Assets

Long-term Assets

 

Why in the heck did we split so nicely and clearly and then pick one from each group?

Sorry, can't answer that, I just know that is the practice that has developed over centuries I assume.

 

The good news is that there is soem consistency here in that you have exact same thing in Liabilities.

 

Liabilities

Current

Non-current

 

same as:

 

Liabilities

Short-term 

Long-term

 

Exact same but opposite, since assets you own and liabilities you owe.

 

Anyone care to give example of each of these categories of Liabilities?

 

 

 

 

Level 3

Re: Need help with a QuickBooks entry


@Karen wrote:

I spoke with my CPA and told me it's wrong and never to use "Other Asset" type account for credit card related transactions. Use "Other Current Asset" type account in QuickBooks. On the Balance Sheet, all the asset types are the not same, they've different financial meaning.

 

I then Google myself and learned the difference between "Other Current Assets' type account and "Other Assets" type account on the Balance Sheet. Yes, it's an error to use "Other Asset" as suggested here.


Your CPA is correct. Current Assets and Other Assets do have different meanings on the Balance Sheet. 

 

If I had to guess, I would say that the suggestion to use "other asset" was an oversight that didn't take this classification into account. Many small businesses don't know the difference, and they wouldn't be impacted by the misclassification either; however, the more accurate classification would be a current asset.

 

My original suggestion for an IC loan was to use a new AR account, which is also a current asset, and would allow the user to toggle between the IC loan account and regular AR when applying payments and cc charges in QB; however, you would have to be careful to not apply charges incorrectly between the two AR accounts. On the flip side, using "other current liability" or a second AP account for an IC loan is also a current liability, rather than "other liability". Using the second AP account allows toggling between accounts for entering bills and applying payments, but it also requires attention to detail to avoid erroneous entries. 

 

Using the IC loan suggestion would be best suited for a company that plans to continue to use the accounts though. They would need to document the agreement between the companies, the repayment terms, and whether items are charged at cost or with a markup of any kind, and then the entries would need to match between both companies each month. It's not really for a one-time fix, but more for a situation where one company may make purchases or provide services to another related company.

 

Equity accounts are an option for a one-time fix, depending on the tax structure of an entity, but I definitely recommend discussing all of these entries with a tax professional to determine the best treatment for any particular set of companies since these are all entries that would affect tax reporting, potentially on multiple levels.

Level 3

Re: Need help with a QuickBooks entry - Kudos to Karen


 

Anyone care to give example of each of these categories of Liabilities?

 


Mortgage loans are a great example. Although a mortgage might be payable over 30 years, there is a current portion (the amount due within the next year) that can be classified as a current liability. At the start of a fiscal year, I typically post adjusting entries (JE's) to move the current portion of a mortgage from long-term to current, leaving the remainder in long-term. This distinction is also made on the balance sheet for business tax returns. 

 

For businesses that utilize various ratios for financial analysis purposes, the classification of assets and liabilities in current or long-term categories can have a big impact. For businesses with bank loans and other creditors, these ratios can be important for meeting loan/credit requirements.

 

IC loans can be classified as both as well, depending on the repayment terms and nature of the particular transactions that make up the loans. 

Level 12

Re: Need help with a QuickBooks entry - Kudos to Karen

Okay, so I have not read every single post so I may have missed where it should have been mentionedf that each company can be a customer of or venbdor to the other. If Company A credit card is used to purchase something for Company B then that is a billable expense, which can include  amarkup when invoiced.  This does require that each company is a unique entuty with a unique FEIN. If both companies are sole proprietorships of same sole owner (or even simple LLC) then truly owner draw and owner contirbution make the most sense.

 

In the world of small business it is not always convenient or even possible to secure credit cards in the name of the business; most sole props use personal cards instead. And due to fund shortfalls it is not always possible for one company to reimburse another, in which case intercompany loans are the way I see to go. In the corporate world you can have loans to and from the shareholders so why not between 2 companies that exist at arm's length. 

 

Regarding Finfrock, and current due on long term liabilities, I have been there and had to do that for banks and other lenders, the sole reason to determine cash flow and liquidity based on everything possibly due in 30 days. It means nothing for tax purposes, only for borrowing.

Level 3

Re: Need help with a QuickBooks entry - Kudos to Karen


@john-pero wrote:

Okay, so I have not read every single post so I may have missed where it should have been mentionedf that each company can be a customer of or venbdor to the other. If Company A credit card is used to purchase something for Company B then that is a billable expense, which can include  amarkup when invoiced.  This does require that each company is a unique entuty with a unique FEIN. If both companies are sole proprietorships of same sole owner (or even simple LLC) then truly owner draw and owner contirbution make the most sense.

 

In the world of small business it is not always convenient or even possible to secure credit cards in the name of the business; most sole props use personal cards instead. And due to fund shortfalls it is not always possible for one company to reimburse another, in which case intercompany loans are the way I see to go. In the corporate world you can have loans to and from the shareholders so why not between 2 companies that exist at arm's length. 

 

Regarding Finfrock, and current due on long term liabilities, I have been there and had to do that for banks and other lenders, the sole reason to determine cash flow and liquidity based on everything possibly due in 30 days. It means nothing for tax purposes, only for borrowing.


 

I agree on the customer idea... I was actually discussing this with Teri privately yesterday, but didn't post it here. That is definitely an option as well and I'm glad you brought it up here.

 

I also agree on the difficulty of getting credit cards for small businesses, so sometimes you just have to figure out how to make it work. I don't shy away from creating loans between companies at all if it seems like the best solution. 

 

Thanks for the follow up on the cash flow and liquidity discussion. I know it doesn't impact taxes, but there is a line for it on the balance sheet. If nothing else, it is a tool for the IRS or other stakeholders to see what your business is reporting on these lines, but definitely does not have an impact on tax calculations.  

 

Great post and glad to see another point of view here. :)

Level 7

Re: Need help with a QuickBooks entry - AMEX Sharing

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. 

 

 

 

 

 

 

 

Level 12

Re: Need help with a QuickBooks entry - AMEX Sharing

My ecxperience has been to date with cost sharing between 2 LLC's whose principals are essentially the same. One has both husband and wife as members and the opther connected company has only the husband as sole member. Unless a husband and wife can and choose to file separately at tax time the difference between ownbership of a H/W and just H is nothing as a joint return includes income from all parties. Where it can get a little sticky is when there is an outside the marriage member of the LLC (or if even one company is incorporated)

 

I have been through an IRS audit with one company who has loaned funds (by paying expenses) for teh second company. Maybe the agent found enough to make their quota and did not need to hammer on the intercompany transfers.  And we have for 2016 tax year moving forward switched tax CPA firms so I have yet to see any proposed changes in how we address this. More concerning would be how the bank(s) view it and if it should all be personal draw and contribution. In the end, for 2 or more LLC or Sole Prop owned by same individual (individual refers to married couple filing jointly as well) the net taxable income for the 2 companies is equal to the sum of net taxable even if no funds were loaned or borrowed between the 2 companies but all funds came from outside

Anonymous
Not applicable

Re: Need help with a QuickBooks entry - AMEX Sharing

I took some time to read this whole discussion. It has a ton of great information and honest perspective.  We have come to a point where the conversation has diluted the purpose of the original post. To preserve it and prevent it from diverging further, I am going to close the thread to new replies.  

 

-John

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