What's the best way to handle transfers to and from personal bank accounts?

Let's make sure that all of your transactions are recorded correctly, mhcarey.

There's a different way of recording business expenses using personal accounts in QuickBooks Online. I'll share the steps with you. 

First, record the business expense you paid for with personal funds. Here's how:

1. Click the + New button and select Journal entry.
2. In the first line, select the expense account for the purchase.
3. Enter the amount in the Debits column.
4. Select Partner's equity or Owner's equity in the second line, then enter the same purchase amount in the Credits column.
5. Click Save and close.

Second, decide how you want to reimburse the money. For the reimbursement, you have two options. You can either record a reimbursement as a check or record it as an expense. Here's how to create a check if you want to go it that way:

1. Click the + New button and select Check. 
2. Select a bank account to use to reimburse the personal funds.
3. In the category column, select partner's equity or owner's equity.
4. Enter the amount to reimburse.
5. Select Save and close or Save and new.

You can also follow these steps if you want to record the reimbursement as an expense:

1. Click the + New button and select Expense. 
2. Select a bank account to use to reimburse the personal funds.
3. In the category column, select partner's equity or owner's equity.
4. Enter the amount of the reimbursement.
5. Select Save and close.

Check out these articles for additional guidance about these functions: 

• Pay for Business Expenses With Personal Funds
• Mixing Business and Personal Funds
• Transfer Funds Between Accounts

Although, we would still recommend reaching out to your accountant for further advice on this matter. You can also save these articles in case you will need them in your future tasks: 

• Pay for Personal Expenses From a Business Credit Card or Bank Account
• How Credit Card Accounts Are Treated for Cash-basis Statements 

Don't hesitate to reach out or reply to me if you need anything else. We're always here to help with any QuickBooks-related questions and inquiries.

Hi JenoP,

Thanks for your answer. I didn't really understand it at first, because I didn't know what owner's equity/owner's draw/owner's investment meant. I did some research and I think I understand those concepts now, so thanks for pointing me in the right direction.

I have a few follow-up questions:

1. On the page Pay for Business Expenses With Personal Funds, the video says to add a new expense, but the text says to add a new journal entry. Which is correct?

2. I have already imported all of my past PayPal transactions into QuickBooks by linking my PayPal account. Can I simply change the category of these existing transactions to owner's draw or owner's investment, as appropriate, rather than manually adding a journal entry for each one?

3. How should I mark transfers into PayPal (which I'm treating as a business account) that were made to cover a personal purchase? For example, if my PayPal balance was $100 and I then made a personal purchase of $120, my PayPal statement would show two transactions: a $20 credit card deposit from my linked credit card to PayPal (increasing my balance to $120), followed by a purchase of $120. I think the $120 transaction can be marked as a personal expense (and not an owner's draw), but what about the $20 transaction? I don't think it's an owner's investment, since it was purely for a personal purchase.

Thanks for your help!

Hi JenoP,

Thanks for your reply. I have some follow-up questions.

How should I mark transfers into PayPal (which I'm treating as a business account) that are made for personal purchases? For example, if my PayPal balance is $100 and then I purchase something for $120, my PayPal statement shows two transactions:

1. A credit card deposit of $20 from my linked credit card (essentially a transfer from my credit card to my PayPal account to cover the difference in purchase price and my existing balance)

2. A purchase of $120

How should I handle the $20 transaction? It does not seem like an owner's investment, since I made it purely in order to purchase a personal item, nothing to do with the business.

And how should I handle the $120 transaction? It does not seem like an owner's draw, since I'm not sending money to myself, but rather to a 3rd party to buy something. It seems more appropriate to mark it as a personal expense.

Also, on the page Pay for Business Expenses With Personal Funds that you linked, the video says to add a new expense, but the text says to add a new journal entry. Which is correct?

And finally, I have already imported all of my PayPal transactions into QuickBooks by linking my PayPal account. Do I have to manually create journal entries for each personal expense that I already imported, or can I just find the existing transaction and change the category to owner's draw or owner's investment?

Thanks for your help!

Thanks for getting back to us to clarify the correct steps to track the transactions in QuickBooks, mhcarey. I'll make sure this gets sorted out.

Both steps will work in recording business expenses using personal accounts. If you'd like to use the Expense type, make sure the equity amount is negative so that it'll be credited correctly. 

As for tracking your personal purchase paid by your PayPal account. I'd suggest following these steps:

To start, let's record a personal expense from the business account. Here's how:

1. Go to the + New menu.
2. Select Check or Expense.
3. Choose a Payee from the drop-down menu.
4. Select the PayPal account you used to make the purchase.
5. Enter the amount of the purchase.
6. Click Save and close.

Once done, you can now reimburse the company:

1. From + New, select Bank Deposit.
2. Select the Account to add the reimbursement to, and select the Date.
3. Go to the Add funds to this deposit section.
4. In the Received From field, enter the person who made the personal expense, then select the account. 
5. Select the Payment Method and enter the reimbursement amount.
6. Click Save and close.

To learn more, please check out this article: Handle a Personal Spending in a Business Account.

For the imported PayPal transactions, I'd suggest consulting an accountant to ensure they're categorized accurately. If you don't have one, we can help you look for an expert through our Find an Accountant tool.

Additionally, I've added an article that'll help you track your cash flow in QuickBooks Online. This helps you have a clear look at your current and future businesses finances: Company Snapshot.

I'm only a few clicks away if you need assistance with your other QuickBooks tasks, mhcarey. It's always my pleasure to help you out again.