Record and reimburse owner payments on behalf of the company.

doron · ‎September 26, 2019

I have made purchases with personal funds for the company and all articles i find seem like workarounds rather than correct methods. They all also happen to be different methods which is worrisome. I need to do the following.

1. record the purchase( expense )

2. increase short term loan account under my name

3. reimburse myself from the company bank account ( decrease bank and decrease current liability)

what is the correct way to record this within quickbooks.

the company is a pty ltd .

doron · ‎September 26, 2019

Thanks for the replies here, I eventually contacted the official SAICA ( south african Institute of charted accountants ) that set the legal aspects based of IFRS. They indeed confirmed that I should be using the loan account method as I originally posted along with my question

qbteachmt · ‎September 26, 2019

Great! Thanks for coming back and updating this, a Peer User forum. Now someone might learn from your posting, here.

TaxDetective · ‎September 26, 2019

I have a video that may help with perspective on your question. It doesn't matter how it was paid, is the title, found on my Youtube channel

Best way is to record a credit card type account entry, using the name of the vendor you paid, to record a liability to yourself, and then, when you reimburse yourself, record the payment to that credit card type account. When you reconcile your accounts, remember that credit cards are usually personal, and they should be added to your Due to proprietor/partner/shareholder accounts to determine your total debit/credit balance to ensure you aren't in a debit position if you're incorporated, and required to pay yourself a salary to get rid of the debit balance. If you're self employed, it's not an issue.

TaxDetective · ‎September 26, 2019

this video is for a Canadian audience, but it may help you with your systems design, and if so, I'm happy.

qbteachmt · ‎September 26, 2019

"They all also happen to be different methods which is worrisome"

That's because the users here are from various Countries, and our accounting rules and regulations also Vary.

For example, in the US, a Sole Proprietorship never "owes" the owner. There is not owing to/from yourself, for this tax entity type in the US. Business purchases made by owner using personal cash, check, credit cards, or even chickens, is just part of Owner Equity In. The owner has the right to take funds Out, at any time. There is no Debt liability here.

doron · ‎September 26, 2019

thanks for the response however as noted above the company is a Pty Ltd rather than a sole prop. I understand the equity usage for a sole prop or an LLC. I need the correct/most practical method for a pty Company specifically. which is why I asked about the usage of a short term loan ( current liability) made out to the owner.

TaxDetective · ‎September 26, 2019

That's why using a credit card liability type account is perfect. It allows you to compile a list of what's owed, and pay it. You can always identify the person in the title of the account, instead of Mastercard or Visa,

doron · ‎September 26, 2019

thanks for the response Eileen, my only question is would this be the correct way to do this from an accounting perspective? I am not looking for a work around I am looking for an officially acceptable method of book keeping based on IFRS and GAAP .

TaxDetective · ‎September 26, 2019

it would be more correct than using a supplier in the AP accounts. Normal protocol is to EXCLUDE the owner/manager and employees from the trade payables and receivables accounts. Whether you record these liabilities as current or long term can be dealt with at year end, but, during the year, they should be kept separate from the trade payables. Because the credit card account type isn't a trade payable, it's perfect. You will have to ensure that it's clearly marked as being for the account of an owner, and not a trade or credit supplier who is arms length.

qbteachmt · ‎September 26, 2019

"the company is a Pty Ltd rather than a sole prop."

That's fine, but we don't know your specific account requirements. You need to read Support articles that apply to you; I was answering why you see Various methods. They don't all apply to you.

"I need the correct/most practical method for a pty Company specifically. which is why I asked about the usage of a short term loan ( current liability) made out to the owner."

What I recommend is asking your own Accountant what applies to you; once you know what it is Called, if you do not know how to make that work in QB, we can help with that part.

Malcolm Ziman · ‎September 26, 2019

One way is to set yourself up as a Supplier and use the Accounts Payable ledger to track the activity

TaxDetective · ‎September 26, 2019

this isn't helpful, as the owner/manager is not the supplier, and the paper trail from the GL back to the paper isn't going to show who the supplies were purchased from

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Record and reimburse owner payments on behalf of the company.