Mixing business and personal funds
Business and personal funds overview
If you pay for company purchases or
assets with a personal check, credit card, or cash, you have, in effect, made a “loan” to your company. You can track these purchases in a QuickBooks' Other Current Liability account.
If you have bank or credit card accounts that you use for both business and personal purchases, categorize each account as either “business funds” or “personal funds.” If you track the account in QuickBooks, it is “business funds” for the purpose of this document; if you don't track the account in QuickBooks, it is “personal funds.”
Setting up your tracking account
Set up an Other current liability account to track all the monies you spend in a mixed business and personal fund environment. If your company is a partnership, you may want to set up an account for each partner.
Note: For the purposes of this document, we have named our Other Current Liability account “Company Owes Me”. This account name is used throughout the procedures. Please substitute your account name wherever it is used.
To set up your tracking account:
- Choose Lists > Chart of Accounts.
- Choose New from the Action pop-up menu (
).
- Select an account type of Other Current Liability.
- Enter an account name like “Company Owes Me.”
- Enter the opening balance (if any).
Paying for business expenses with personal funds
If you pay for business items with personal funds, record the transaction in your “Company Owes Me” Other Current Liability account, showing that the business now owes you this amount.
Use this procedure when you're entering historical transactions, as well as current transactions.
To enter business expenses paid for with personal funds:
- Choose Lists > Chart of Accounts.
- Select your Company Owes Me account, and then choose Use Register from the Action pop-up menu (
).
- In the Increase column, enter the amount you spent for your company and tab to the next line. If you also bought personal items in the same transaction, you don't need to enter those items or amounts. They are not relevant for your company's books.
- In the Account field, select the appropriate expense account. If the amount you are entering is for more than one expense account, click the Splits button. In the Splits window, associate the appropriate portions of the check to the appropriate accounts.
- If anything you bought is reimbursable by one of your customers, or if you want to associate the expense with a particular customer:job for a job report, choose the customer:job name in the Customer:Job field.
Paying for personal expenses with business funds
Use your QuickBooks Other Current Liability account to track use of business funds for personal expenses.
If you buy personal items with business funds, you'll need to enter the transaction in the appropriate QuickBooks Checking, Petty Cash or credit card window or register, using your “Company Owes Me” account.
To enter personal expenses paid for with business funds:
- Choose Banking > Enter Credit Card Charges or Banking > Write Checks.
- Select the appropriate checking or credit card account.
- Enter the amount you spent.
- In the Account field in the detail area, enter Company Owes Me.
- (Optional) Enter any memo.
- Click Record.
If you buy both personal and business items with one check, credit card charge, or petty cash receipt, use the detail area to indicate the appropriate accounts.
- Your business expenses should use the appropriate expense account from your chart of accounts.
- Your personal expense should use your Company Owes Me account. The amount entered here decreases what the company owes.
Buying or transferring fixed assets to your business
You may personally own assets that you want to transfer to your business, or you may have purchased a fixed asset for your business with personal funds.
You'll need to set up fixed asset accounts, and if you plan to track depreciation, you'll need to set up separate subaccounts for original costs and for accumulated depreciation.
For new asset purchases
After you have entered all the asset account information, you'll need to add an entry to your “Company Owes Me” account.
To enter a fixed asset bought with personal funds:
- Choose Lists > Chart of Accounts.
- Select your Company Owes Me account, and then choose Use Register from the Action pop-up menu (
).
- (Optional) Enter the name of the payee.
- In the Increase column, enter the price you paid and tab to the next line.
- In the Account field, select the appropriate Asset account.
- (Optional) Enter a memo.
For assets you want to transfer from your personal holdings to your business
After you have entered all the asset account information into QuickBooks, you'll need to add an entry to an equity account. The transfer of a personal asset is an investment in your business, so you'll use an equity account, rather than the “Company Owes Me” liability account.
To transfer a fixed asset from your personal holdings to your business:
- Choose Lists > Chart of Accounts.
- Select the equity account you use to track owner investments, and then choose Use Register from the Action pop-up menu (
).
- (Optional) Enter your name.
- In the Increase column, enter the depreciated value of the asset and tab to the next line.
- In the Account field, select the appropriate asset account.
- (Optional) Enter a memo.
- Click Record.
Year end considerations
You may want to zero out this liability account at the end of the year, since this liability is not relevant to your business's financial health as a liability to a bank or credit card company would be. Also, if the company owes you at the end of the year, rather than you owing the company, your liability will have a negative balance, which would look odd on your balance sheet reports.
Important: These procedures are only suggestions and are not required.
If your version of the Company Owes Me account shows a greater-than-zero amount
If this account shows a negative balance, indicating that your company owes you money, consider doing one of the following:
- Write a business check for the money owed to yourself or another employee
- Reinvest the money in your company by moving it to an equity account.
To write a business check to reimburse yourself:
- Choose Banking > Write Checks.
- Enter your name in the Pay to the Order of field.
- In the $ field, enter the amount remaining in your version of the “Company Owes Me” account.
- In the Account column, enter your version of the “Company Owes Me” account.
- Make sure the “To be printed” checkbox is selected.
Choosing an equity account to transfer the money to
If you have only one equity account, as many businesses do, use that equity account in the following procedure. If you have several equity accounts or subaccounts, for example:
Owner's equity |
4,800.00 |
Owner's investment |
7,500.00 |
Owner's draws |
2,700.00 |
Use the account you use to track investments, since you're now investing this money in your company.
To transfer the money to an equity account:
- Choose Banking > Make General Journal Entries.
- In the Account column, choose your version of “Company Owes Me” from the list.
- In the Debit column, enter the amount remaining in the account.
- (Optional) Enter any memo.
- In the Account column, choose the appropriate equity account from the list.
You can QuickAdd this account if you don't have one already set up for this purpose.
- In the Credit column, enter the amount to be credited to this account (this will be the same amount as you entered in the Debit column).
If your version of the Company Owes Me account shows a negative balance
If this account shows a negative balance, indicating that you owe your company money, consider doing one of the following:
- Write a personal check to cover any money owed to the company.
- Subtract the money from your equity account.
To deposit a personal check to zero out the account:
- Choose Banking > Make Deposits.
- Deposit your personal check to your Checking or other Bank account.
- In the Received From column, enter your name.
- In the Amount column, enter the amount of the check. This amount should zero out the account.
- Select your Company Owes Me account from the “From Account” list.
This deposit will show up in your Company Owes Me register. The balance of this account should now be zero.
Using an equity account instead of a liability account
If you prefer, you can record each of the transactions described in this document using an equity account (called Company Owes Me, or whatever you choose) instead of an other current liability account.
You may prefer using an equity account, because if the balance of the account is ever negative, you won't have to have a negative liability on your balance sheet. In addition, you wouldn't have to transfer the balance of the account to equity at the end of the year.