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nbishop_springboardssolns
Level 2

How to handle a combined business and personal expense?

I have a monthly expense (cell phone bill) that is partially for my business, and partially as a personal expense.  Currently it automatically deducts from my business checking account, and I transfer the funds to cover the personal portion from my personal checking account. My question is how to handle the deposit/transfer.  I have it as an increase to my Member Draw Equity account, since this is the account I have the expense assigned (the personal portion anyway).  Is this the correct way to handle this?  FYI, I am just starting out and therefore want the cash flow from my personal account to cover this expense.

 

Also, unrelated but another Equity account question: I initially started with some personal money to get the company started, and this is in the Owner Contribution Equity account.  Does this need to be closed out each year to Retained Earnings (Owner's Equity since I'm an LLC)?

Solved
Best answer February 28, 2019

Best Answers
Mark_R
QuickBooks Team

How to handle a combined business and personal expense?

Hi there, @nbishop_springboardssolns.

 

Welcome to the Community family. I'm here to share a few details on how to handle your business and personal expense correctly.

 

Regarding the cell phone bill, you can create an expense for it. Then create a Bank Deposit as a refund/transfer from the personal account. The bank deposit must have the same expense account used from the phone bill. To create a bank deposit, you may read this article for your reference: How to Record Bank Deposits in QuickBooks Online.

 

For additional, bills/expenses will increase the expense account while the bank deposit will reduce the expense account.

 

For your future reference, you can read these articles to handle your business and personal expenses:

 

Also, I encourage seeking help from your accountant. This way, they can offer you some advice about personal and business funds.

 

Fill me in if you have further questions. I'll be around if you need help.

View solution in original post

3 Comments 3
Mark_R
QuickBooks Team

How to handle a combined business and personal expense?

Hi there, @nbishop_springboardssolns.

 

Welcome to the Community family. I'm here to share a few details on how to handle your business and personal expense correctly.

 

Regarding the cell phone bill, you can create an expense for it. Then create a Bank Deposit as a refund/transfer from the personal account. The bank deposit must have the same expense account used from the phone bill. To create a bank deposit, you may read this article for your reference: How to Record Bank Deposits in QuickBooks Online.

 

For additional, bills/expenses will increase the expense account while the bank deposit will reduce the expense account.

 

For your future reference, you can read these articles to handle your business and personal expenses:

 

Also, I encourage seeking help from your accountant. This way, they can offer you some advice about personal and business funds.

 

Fill me in if you have further questions. I'll be around if you need help.

View solution in original post

nbishop_springboardssolns
Level 2

How to handle a combined business and personal expense?

Thank you, @Mark_R , I appreciate your  quick and thorough response.  Your suggestion makes sense, because then I'll be crediting and debiting the phone bill expense, so it ultimately reflects what the business is actually spending.  Am I understanding this correctly?

 

Do you have any knowledge about how to handle the starting owner's contribution?

Mark_R
QuickBooks Team

How to handle a combined business and personal expense?

Thanks for getting back to me, @nbishop_springboardssolns!

 

Yes you're correct! It shows what the business actually spending. 

 

To handle the owner's contribution, you need to set up an owner's draw account as an equity account. An equity account used to track withdrawals of the company's assets to pay an owner. If you're a sole proprietor, you must be paid with an owner's draw instead of employee paycheck.

 

To create an Equity account, here's how:

 

  1. Click the Gear icon, then select Chart of Accounts.
  2. Click New.
  3. From the Account Type drop-down, select Equity.
  4. From the Detail Type drop-down, choose Owner's Equity.
  5. Enter an opening balance.
  6. Click Save and Close.

After creating the account, you can write a check from an owner's equity account to pay them.

 

You can read through these articles for detailed information:

 

Most importantly, I still recommend checking with your accountant for more guidance. He/she may add suggestions based on what's more suitable for your business and to your books.

 

Feel free to let us know if you have any other concerns. We'll be here to help you. Have a wonderful day!

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