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TToo
Level 1

How to record a billable expense that was paid with owner's investment. ( i used my personal credit card to pay for an expense billable to the customer)?

Normally i used a journal entry to post expenditures/transactions made using my credit card, by debiting the expense category and crediting owners equity (since i am investing this money in the business). However, since billable expense is classified as income how do i record this entry without it inflating my receivables, since i have invoiced the customer for this expense i incurred.

if not doing the Journal entry - Another issue when creating the expense transaction to record the billable expense i have to select a payment account, which account should i select since the transaction will not appear in any of the linked accounts in quickbooks?
2 Comments
john-pero
Community Champion

How to record a billable expense that was paid with owner's investment. ( i used my personal credit card to pay for an expense billable to the customer)?

Today we are going to learn about Clearing accounts and how to use them when an equity account cannot be selected when creating a vendor expense. Open your QBO and follow along.

 

  1. Create a dummy bank type account called Clearing Account or something similar
  2. Create Vendor Expense from this Clearing account for expense you paid with personal funds
  3. while creating the expense mark it as billable to customer
  4. Save
  5. make deposit to Clearing account from Owner Equity Contribution to zero out the clearing account.
  6. create invoice for customer based on selecting billable expenses and adding upcharge if applicable
  7. receive payment from customer
  8. spend profit on yourself

Okay the last two not necessary to the process but rather than journal entries for when you pay out of pocket for business purpose use a clearing account. For cash or checks from personal you can also use your Petty Cash or Cash on Hand bank account. In fact you could simply use your Cash account instead of a separate clearing account even for credit card based purchases

 

Hope this helps

jjgfromnj
Level 1

How to record a billable expense that was paid with owner's investment. ( i used my personal credit card to pay for an expense billable to the customer)?

I know this is a while ago but would this be markedly different for QBD?

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