Personal Payments for Business Expenses in QuickBooks Online
A lot of small business owners pay for business expenses with personal funds before they have any sales to supply cash to the business. These transactions need to be recorded in the books, but they don’t flow in through the bank feeds because they are in personal accounts (which should never be connected to the QBO bank feeds). Here’s how to get these transactions recorded.
1. Decide if the money will be paid back to the owner. The business owner needs to choose if they want to consider this to be contributed capital or a loan. If they choose to consider it contributed capital, they will not get the money back until they close or sell the business. If they do want the money back, then it is considered a loan, and the business can pay them back when it has the cash flow to do so.
2. Record the transactions as a journal entry. Go to the +New button in the left sidebar menu of QBO, and then navigate to Journal Entry and click on it to open the new journal entry screen. Enter the date of purchase and then enter the transaction with debits for the expense and /or equipment that was purchased. The balancing credit will go to the Contributed Capital account or to the Due to Shareholder loan account. The memo for the journal entry will be “to record business expenses paid for personally.”
3. Run reports to check your entry. Go to Reports and run a Balance Sheet and a Profit & Loss and check to see that you have recorded these transactions properly.
The video below will walk you through this process step by step!