Owner's investment in LLC - what to do with these three personal credit/debit card accounts? How to reimburse?

Will1901 · ‎September 07, 2020

Hello,

I had some organizational and startup costs for my LLC, of which I am the sole member and owner. This was prior to me having my business checking account. These costs were paid for using two of my personal credit cards as well as my personal debit card. When completing the expense transactions I had to create two credit card and one debit card accounts to use as the 'payment account'(s). When completing the transactions I debited the necessary expense category and credited the equity account 'Owner's Startup Investment', which is a sub-account I made under 'Owners Investment'.

So my first question is, is it okay to have these three personal cards showing in the chart of accounts? They have a zero balance. They are named 'Discover - Personal Card', 'Chase - Personal Card', 'Citizens - Personal Card'.

Second, how do I go about reimbursing myself? I wish to move funds from my linked business checking account to my personal checking account. I created a sub-account under 'Owner's Pay & Personal Expenses' titled 'Owner's Startup Investment Reimbursement'. Can I simply credit this account and debit the 'Owner's Startup Investment' account? Is there anything else necessary to do in terms of showing the money transferring from the business to personal checking accounts?

Thank you very much,

Will

CharleneMaeF · ‎September 08, 2020

Allow me to jump in on this thread, Will1901.

Yes, you can set up and pay an owner's draw to record the expenses. I'll guide you how.

To begin, we'll have to create an equity account.

Go the Gear icon and then select Chart of Accounts.
In the Chart of Accounts window, select New.
From the Account Type drop-down, choose Equity.
From the Detail Type drop-down, choose Owner’s Equity.
Enter an opening balance.
Select Save and Close.

Then, let's write a check from an owner's equity account.

Click the + New icon and then select Check.
Choose the bank account where your money will be withdrawn.
Select Print later if you want to print the check.
Fill in the check fields. In the Account field, be sure to select the Owner's equity you created.
Once done, click on Save and Close.

As for your personal account, yes you can inactivate it. Need not to worry, inactivating accounts doesn’t erase your transactions, so your reports won’t change. You also have an option to restore the account.

Go the Gear icon and then select Chart of Accounts.
Look for your personal account.
In the Action column, click Make inactive.
Click Yes on the prompt message.

To learn more about deleting an account, check out this article: Delete an account on your chart of accounts in QuickBooks Online.

You may also want to consider using account numbers in your Chart of account. Doing so can keep your accounts organized and easy to find by assigning numbers.

If you have other concerns, please let me know. Take care!

View solution in original post

Jovychris_A · ‎September 07, 2020

I'll help you record the transaction, @Will1901.

Firstly, yes, you're correct to add those accounts, especially, when those are used to pay for business expenses.

Next, let's create an expense transaction or check to record expenses. Here's how:

Click the New or Plus sign (+) button.
Select either Check or Expense.
Fill in the necessary fields.
Click the Payment account drop-down arrow, then select the personal account.
Click Save and close.

Although, if this expense hasn't been paid yet, you can create a bill, then pay it using the personal account.

I'll share the article on how to pay for business expenses with personal funds. It will provide the steps on how to reimburse a personal expense.

Please feel free to post a comment if you have more questions. I'll respond to you as soon as I can. Take care!

Will1901 · ‎September 08, 2020

Thanks for the response. I have seen multiple people say to use the 'Owner's Pay' account rather then simply writing a check to a payee. What do you think of this?

Also, now that I have the business account, is there someway to remove the personal accounts from the balance sheet while retaining the past transactions?

Thanks,

Will

CharleneMaeF · ‎September 08, 2020

Allow me to jump in on this thread, Will1901.

Yes, you can set up and pay an owner's draw to record the expenses. I'll guide you how.

To begin, we'll have to create an equity account.

Go the Gear icon and then select Chart of Accounts.
In the Chart of Accounts window, select New.
From the Account Type drop-down, choose Equity.
From the Detail Type drop-down, choose Owner’s Equity.
Enter an opening balance.
Select Save and Close.

Then, let's write a check from an owner's equity account.

Click the + New icon and then select Check.
Choose the bank account where your money will be withdrawn.
Select Print later if you want to print the check.
Fill in the check fields. In the Account field, be sure to select the Owner's equity you created.
Once done, click on Save and Close.

As for your personal account, yes you can inactivate it. Need not to worry, inactivating accounts doesn’t erase your transactions, so your reports won’t change. You also have an option to restore the account.

Go the Gear icon and then select Chart of Accounts.
Look for your personal account.
In the Action column, click Make inactive.
Click Yes on the prompt message.

To learn more about deleting an account, check out this article: Delete an account on your chart of accounts in QuickBooks Online.

You may also want to consider using account numbers in your Chart of account. Doing so can keep your accounts organized and easy to find by assigning numbers.

If you have other concerns, please let me know. Take care!

Will1901 · ‎September 08, 2020

Thanks alot.

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Owner's investment in LLC - what to do with these three personal credit/debit card accounts? How to reimburse?