How to Record Expenses Paid by the Owner’s Personal Funds
Frequently, business owners will pay for business expenses with personal funds. These expenses can be recorded in QuickBooks® in one of several ways. How quickly the business will repay the expenses can determine the best way for the client to record the transactions.
- If the client is paying the expenses immediately, users can write a check to reimburse the owner for the business expenditures paid for with personal funds.
- If the owner cannot reimburse themselves in the short term, a journal entry can record the expenditures. While the expenses paid will be debited, the account to be credited can vary depending on the legal structure of the business. The account to be credited can be a Loan from Shareholder account if loan documents have been drafted or Owners Contribution, an equity account, if the expenses are considered capital contributions. Clients should consult their tax professional if they are unsure of the proper account.
- In some cases, the owner may wish to be reimbursed, but the business is unable to pay the expenses in full. A credit card type account could be created to account for the transactions as discussed in the section on Credit Cards and the name of the account could be Due to Owner-Short Term or similar description.