pay for personal line of credit with business account

JackieLopez · ‎June 12, 2020

Hello, when we started our company we opened a personal line of credit to help pay for our business expenses. We are now paying the personal line of credit with our business account funds. I created an account for the line of credit and classified the type as credit card. Every month we make a transfer payment from our business banking account. When I check my chart of accounts the amount is negative. I am not sure if I am recording the expense wrong and its making the balance in quickbook negative. I am also not sure if I record the transfer as a credit card or a liability. I am new to this and just making sure I am doing it correctly. We also have a personal loan and personal credit card that we make monthly transfer payment from our business account. The personal loan is marked as a long term liability and the amount in quickbooks is negative. The personal credit card is marked as a credit card but the amount is not negative. I would appreciate any opinions or thoughts. Thanks again in advance.

john-pero · ‎June 12, 2020

When you started the business with personal funds that LOC should have entered your company books as Owner Contribution (equity) and paying it back is Owner Draw (negative equity) Because (I presume) you did not record the personal debt against the expense as incurred you are now paying down from a beginning balance of zero so yes, it would be negative.

The personal loan paid with company funds, other than having no business in the business, is Owner Draw and payments toward it are just Owner Draw. Do not post the loan amount in QB unless you used the funds for the business, just continue making the payments on your behalf as draw. Same with personal credit card - do not keep track of it in the business unless you are charging a majority of its charges for business, otherwise your paying it with business funds is, again, owner draw

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Rustler · ‎June 12, 2020

making the personal line of credit a credit card is fine, but it has to have a balance of the charges you used it for. Either enter all the expenses using enter CC charges from the plus menu, or enter the balance owed with the source account a cash type account and enter the expenses from there.

Then the transfer (payment) on the LOC will lower the balance, sounds like there was not a balance owed to start with

john-pero · ‎June 12, 2020

When you started the business with personal funds that LOC should have entered your company books as Owner Contribution (equity) and paying it back is Owner Draw (negative equity) Because (I presume) you did not record the personal debt against the expense as incurred you are now paying down from a beginning balance of zero so yes, it would be negative.

The personal loan paid with company funds, other than having no business in the business, is Owner Draw and payments toward it are just Owner Draw. Do not post the loan amount in QB unless you used the funds for the business, just continue making the payments on your behalf as draw. Same with personal credit card - do not keep track of it in the business unless you are charging a majority of its charges for business, otherwise your paying it with business funds is, again, owner draw

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pay for personal line of credit with business account