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Categorizing personal charges

I have my personal bank account linked to QB. I do not have a business bank account yet and use my personal account for both personal and business purposes. Having my account linked shows both personal and business charges. How do I categorizes my personal charges as they have nothing to do with my business. So far I have just put them under a personal expense category but would like some more insight to make sure I am tracking correctly.

 

 

3 Comments
Established Community Backer ***

Re: Categorizing personal charges

You would Unlink that account. Never try to track a Personal Account in the business.

 

Make a Bank type of account and name it Owner Funds. Use it to make your own entries, and only the Business entries. This is "owner paid" by personal check or debit card or personal cash or personal credit card.

 

When you get paid from clients, that is deposited here as usual, because you Kept the money, either in personal checking or as cash on hand.

 

And this bank account runs negative from spending, so you bring it to 0 by making a deposit entry as your Equity.

 

Never link Personal in the business.

Frequent Explorer **

Re: Categorizing personal charges

I have had my personal & business banking, expenses, etc combined ever since the start of my LLC business. My accountant hasn’t had a problem with it. Any personal expenses are categorized as ”owners draw”, then further categorized by medical, groceries, entertainment etc in owners draw & Fuel, licenses, taxes, maintenance, etc in business. Why would this be a problem?

Moderator

Re: Categorizing personal charges

Hi there, haulinharley. I'd be happy to answer your post.

 

In general, it is not advisable to mix personal and business funds since in QuickBooks Online (QBO), your check and credit card accounts should be business-only accounts, but if you run into a situation where business and personal finances mix, I've got some articles that will guide you on how to record such transactions.

 

For information about owners or partners mixing business and personal funds, check below articles:

To know on how to reimburse employees who use their personal funds for business expenses, you can read this article: Reimburse an employee.

 

Moreover, I'd recommend checking with your accountant for information on how your business should classify these transactions. This is to ensure an accurate record of your accounts.

 

If there's anything else I can help you with in managing your QuickBooks Online account, please let me know by commenting below. I'm more than happy to further assist you.

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