Sole Proprietorship Expenses paid with Owner's Personal Funds

MF Arepas · ‎September 02, 2020

Sole Proprietorship. QB Online.

I paid for the following expenses with a personal checking account:

Website/Software: 300

Permits/Fees: 500

Truck Down Payment: 10,000

Total: 10,800

My business checking account will be set up in a few days, and I would like only have the business checking on QBO (not my personal checking). What is the most elegant way to account for the above business expenses purchased with personal funds? Just add 10,800 to Equity Investment Account?

The rest of the truck will be paid on September 25th, when the truck is ready. Should I pay for the rest of the truck with personal funds and then transfer it to the company as an Asset using Equity Investment Account?

I'm a newbie, so please excuse my ignorance.

Thanks for any help!

john-pero · ‎September 02, 2020

For a newbie you already have a good grasp of the situation regarding use of personal funds for business expenses. Any money or goods/services purchased with personal funds for business purpose is Owner Contribution. Any and all money taken out for personal use (or paying yourself) is Owner Draw. Both are equity accounts and wed like to track Draw and Contributions on an annual basis by having a third Owner Equity account. The third account resolves retained earnings (your profit) and on day 1 of each year the rollup of draw/contributions into O.E. Additionally if you make all three of these equity accounts sub-accounts of a parent summing account (that is never posted to) you can see a running total of current value of equity at any point in time

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john-pero · ‎September 02, 2020

For a newbie you already have a good grasp of the situation regarding use of personal funds for business expenses. Any money or goods/services purchased with personal funds for business purpose is Owner Contribution. Any and all money taken out for personal use (or paying yourself) is Owner Draw. Both are equity accounts and wed like to track Draw and Contributions on an annual basis by having a third Owner Equity account. The third account resolves retained earnings (your profit) and on day 1 of each year the rollup of draw/contributions into O.E. Additionally if you make all three of these equity accounts sub-accounts of a parent summing account (that is never posted to) you can see a running total of current value of equity at any point in time

MF Arepas · ‎September 03, 2020

Thank you sir!

I have an Owner Equity with Contribution and Draw sub accounts. As advised, I will add the third sub account for the new year's day roll-up.

MF Arepas · ‎September 03, 2020

edit: double replied...whoops.

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Sole Proprietorship Expenses paid with Owner's Personal Funds