Greetings to all,
I am seeking some accounting advice on behalf of my business partner and myself. We started a small service based business in February 2010. We do have a federal ID and we did file a 1065 w/ K1's for the 2010 year.j
Our business is registered as being a partnership, with both my business partner and I each owning 50% of the business. This is a part time business for us, weekends only, and both my partner and I have full time jobs that support our families. This business was started in order to eventually create extra income for the both of us in addition to our regular income.
Since opening the business, both my business partner and I have made purchases on behalf of the business, but have paid for these purchases from our own personal accounts. Because of this, the business 'owes' each of us so much money for each of our purchases. These debts have not yet been recovered. To date, all income that we have made from the business, we have put back into the business in order to purchase additional equipment, so right now, neither of us has taken an income from the business.
To date, we have recorded our expenses, income, purchases on ledger sheets. We now want to begin the process of transferring everything over to a software package that will make it easier to track our accounting information. For various reasons, we have selected a package called FrontAccounting that we will be using to handle our bookkeeping tasks. One of the primary reasons being is that we can host the program online from our own website, so that both my partner and I have access no matter where we are at. Our plan is to go back and put all of our information from 2010 in to the program so that we can generate histories.
So, now that I have provided some background information, I'll come to my questions.
1. What is the best way to account for the debt that the business owes both my partner and myself? And what is the best way to enter these transactions. As I stated above, we plan to manually enter all of our 2010 transactions, so for like an advertising expense that I personally paid for, we would credit advertising expense, but we wouldn't debit cash because there was none. So do I create a payables account for myself so that the business shows that this is an outstanding debt that is still payable? Not sure what to do here.
2. There have been a couple of occasions when my partner and I have used the business debit card to pay for a personal item, but then we have paid that $$$ back to the business checking account. What is the best way to record and account for these transactions? And if either one of us would not immediately pay back something like this, we would want to be able to identify when we owe the business for these expenses. So in this case, would we create a personal expense account for each of us, so that when something was paid it would credit the personal expense account and debit the cash account. Then when paid back, it would credit cash and debit the personal expense account?
3. Other than the debt owed to each of us, we have very little overhead. We have a very small loan payment ($50 per month), a monthly access payment ($15.00) that the business currently has enough in our checking account to cover these expenses thru the end of the year.
4. When all of the personal debt that the business owes us has been paid, what is the best way to account for the money we each take out of the business. Our plan is, after the debt has been recovered, is say we have an event that we earn $500. We would each take a pay of $200 each, and leave the other $100 in the business account.
I do appreciate any advice that can be offered. We are a very small business. Last year our revenue was about $2000 and so far for this year our revenue is about $4000. So business is slowly but surely picking up. We are pleased with the growth that we have seen so far. We don't want to spend a great deal of time dealing with the accounting issues of running a business, and we simply don't have the funds to have someone else run our books for us.
Thanks!!!
Airwolf
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