If I withdraw cash from the business checking account and pay a mechanic for repairs, How would I record this?

Hi there, @Sriv215.

I can provide information about recording your expenses paid using a business checking account in QuickBooks Online (QBO).

No, it isn't a problem. To enter or record expenses paid using a business checking account, all you need to do is to create a Journal Entry (JE) in QBO. The steps to do this are pretty quick and easy.

Here's how:

1. In QBO, go to the + New option at the upper left.
2. Select Journal Entry.
3. On the first line, choose the expense account for the purchase.
4. Enter the purchase amount in the Debits column.
5. On the second line, select Partner's equity or Owner's equity.
6. Enter the same purchase amount in the Credits column.
7. Once done, hit Save and close.

If you wish to process a reimbursement for this expense in the future, you can refer to this article and proceed to Step 2 the detailed steps on how to do it: Pay for business expenses with personal funds.

For more tips and other resources, I recommend visiting our website. Here's the link: Self-help articles.

Click the Reply button below if you have more questions about this or anything else QuickBooks. I'll be more than willing to assist. Take care.

@Sriv215 

Is the mechanic an employee of your shop?  If so, then yes, it's a potential problem:

1) If the mechanic is an employee of the shop then you need to record it as wages paid to an employee.  You should withhold federal income tax, state income tax (if applicable), Medicare and SS.  The company needs to match the Medicare and SS portions.

2) If you don't have a receipt, what will you tell the IRS if they ask what the withdrawal was for?

I get it - the mechanic saves on income taxes and you save on payroll taxes.  The mechanic has no evidence of income because he was paid in cash and provided no receipt, however, you have record of the cash withdrawal.  My father owned an auto repair shop his whole life and did a lot of the same kinds of deals - he was audited by the IRS.

Hi Rainflurry,

Thank you for your response. I am not an automotive shop and the mechanic is not an employee. The shops wanted to charge on average $6200 for the work on my commercial vehicle. I found a specialized mechanic through a friend that does the same work on the side for $2500. I want to save money, but I don't want the hassle of the IRS knocking on my door.

If he will accept a check would that help matters? I have receipts for the parts. In theory if I write a check I can make him a vendor for auto repairs, but I still won't have a receipt since the work is not being done through a shop itself. 

Thanks again for your help.