Recording business expenses paid from personal credit card

How do you record purchases made from a personal credit card?

I have a sole proprietorship.

Sometimes my wife will order things for the business - furniture, office supplies, etc on a personal credit card. In the past, before using a business credit card, I ordered two computers from a personal credit card.

How do I enter these items? I want to get them into quickbooks for tax writoffs.

I need a catch-all account to somehow represent "business purchases made with personal credit card"

Should I just make up a fictional credit card, then enter all the items in there, using the credit card transactions?

Reply to
James
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Set up the credit card account. Post any legit business expenditure to the appropriate expense account. Set up an equity account called "Owner's Draw" and use that account to post all personal expenditures. This would be used for ANY personal expense paid out of the business account.

Just make sure you have good documentation for all of your business expenditures in the event of an audit. It would be best if you could keep your business and personal credit cards and checking accounts separate.

Reply to
Laura

Laura,

Thank you very much.

So you're saying I should enter the personal credit card account into Quickbooks, right?

Then should I just enter those few transactions that were for the business, and then pay those expenses with "Owner's Draw".

I hope that makes sense. I don't want to enter 1,000 personal credit card items just because I have 10 of those items that are business expenses.

Thanks for the tips!

Reply to
James

If the majority of the charges are personal then don't create the credit card account. Treat that credit card as your personal account. Pay the credit card balance using your personal funds to keep things straight.

Instead, create an equity account called Owner Contributions to use instead of the cash account when posting these entries.

You can use JE to Debit {appropriate expense} Credit Owner's Contributions.

If you reimburse yourself for those business expenses write yourself a check that Debits Owner Contributions.

As you can see it would be best if you dedicated a credit card for your business expenses. It makes the bookkeeping easier and less chance of being accused of comingling funds.

Reply to
Laura

What works well is to enter in my petty cash account such business items paid for by cash or by my personal credit card or by check on my personal checking account. My petty cash account is set up as a "checking" type account in QuickBooks.

Bill January, Houston, Texas

Reply to
Bill January

A petty cash account really should only be used for cash held in a drawer. You need to be able to physically count the money periodically to reconcile the account. Using the account for your personal credit card should not be used. Use Owner's Contribution instead.

Reply to
Laura

Laura,

Where would I actually enter these charges, if not in the "credit card" section. Do I just create a "Owner Contribution", and then use the register to input the charges?

Thanks!

Reply to
James

You need to create the Owner Contribution account in the equity section of the COA. Create an Owner's Draw account (equity) if there isn't one already. Since these are not bank type accounts entering the transactions in the register is the way to go. The normal QB screens that require a "bank" account (deposits, payments) won't allow you to specify an equity account as your source of money.

Reply to
Laura

Thanks Laura. That makes sense.

But what is the COA section?

(This is why I am an engineer, not an accountant...)

-James

Reply to
James

Pardon me while I answer my own question. I think you mean "Chart of Accounts".

Thanks for the tips!

Could repay the favor with some mechanical engineering questions if you had any : )

-James

Reply to
James

you are welcome.

Yes. COA=Chart of Accounts. Sorry for the abbreviations.

Reply to
Laura

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