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pml2269487
Level 2

What is the "Payment account" for using cash in my wallet, withdrawn from my personal checking account to, to pay a business contractor? Where is owner equity option?

My business has high revenue, but also high expenses and is running at loss. To "keep the lights on" I have to transfer money from my personal checking account to my business checking account. I know how to record that transfer as owner equity. Sometimes, I have to pay a contractor on the spot and I do it with cash from my wallet, that was never transferred to the business checking account. I am not seeking to be reimbursed anytime soon. I just want to record the expense in Quickbooks, but Quickbooks demands that I list a payment account. There is no payment account. Shouldn't there be an option to select owner's equity? I don't want the IRS thinking I have more income than I actually do. The money in my personal checking account has already been taxed from income earned at a different job. P.S. I know about the corporate veil. Reality is not always ideal. P.P.S. I don't have an accountant, which is why I do Quickbooks myself and try to learn from the Internet.
4 Comments 4
Anna S
QuickBooks Team

What is the "Payment account" for using cash in my wallet, withdrawn from my personal checking account to, to pay a business contractor? Where is owner equity option?

Thanks for providing a lot of details, @pml2269487.

 

Allow me to give you some insight into Expenses in QuickBooks Online.

 

Expenses are considered assets that are resources owned by your business. If you don't expect repayment any time soon, you can consider using our other account detail options, such as Cash on handCheckingMoney MarketRents Held in TrustSavings, and Trust account. These are types of accounts that fall under banking for expenses (see screenshot below). However, the reason that there's not an Owner's Equity selection is that Expenses usually don't have assets with debts or other liabilities attached to them. 

 

 

 

 

I'm only a reply away if you need any more clarification or have any other questions. Wishing you continued business success now and in the future.

pml2269487
Level 2

What is the "Payment account" for using cash in my wallet, withdrawn from my personal checking account to, to pay a business contractor? Where is owner equity option?

Hi, Anna,

 

Thanks for the quick response.  I thought Expenses were any bills I paid, such as rent, utilities, vendors, etc.  If those are not Expenses, then where should I record them?  I don't consider this money lost to be an asset.  :)  In fact, some of my expenses provide zero added value to my business at all and are incurred because something went wrong.

 

 

ReymondO
QuickBooks Team

What is the "Payment account" for using cash in my wallet, withdrawn from my personal checking account to, to pay a business contractor? Where is owner equity option?

Hey there, @pml2269487.

 

Yes, bill payments are considered expenses. However, there's no option to use an owner's equity account when paying bills or recording expenses as previously shared by Anna in the first reply.

 

Although, there's an option to create a journal entry to use an owner's equity to pay for expenses using a personal account. However, we recommend reaching out to your accountant before doing so to make sure these transactions are recorded properly.

 

To record business expenses you made with personal funds in QuickBooks Online, you can follow these steps:

 

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

 

If you decide you reimburse the money, you can proceed to step 2 provided in this article: How to record the reimbursement as a check/expense.

 

That's it! Please let me know if there's anything else I can do to be of assistance. Wishing you and your business continued success in all that you do.

pml2269487
Level 2

What is the "Payment account" for using cash in my wallet, withdrawn from my personal checking account to, to pay a business contractor? Where is owner equity option?

Hello, Reymond,

 

Thank you for the response.  I understand most of your instructions.  The only part I'm confused about is step #2.  What is the expense account for the purchase?  I paid the contract with cash from my wallet that was originally withdrawn from my personal checking account, not my business account.  I'm not looking to get reimbursed anytime soon.  Without owner equity, my business would fail.  I'm trying to keep it going until someday it can make a profit.

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