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Recording business expenses paid from personal credit card

 
 
James
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      08-24-2007, 12:07 AM
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?

 
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Laura
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      08-24-2007, 01:09 AM
"James" <> wrote in message
news: ups.com...
> 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?


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.

 
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James
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      08-24-2007, 04:44 AM
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!

 
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Laura
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      08-24-2007, 11:25 AM
"James" <> wrote in message
news: oups.com...
> 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!


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.

 
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Bill January
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      08-24-2007, 08:18 PM
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


"James" <> wrote in message
news: oups.com...
> 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!
>



 
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Laura
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      08-24-2007, 09:08 PM
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.

--
~Laura~


"Bill January" <> wrote in message
news:%1Hzi.6597$ t...
> 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
>
>
> "James" <> wrote in message
> news: oups.com...
>> 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!
>>

>
>


 
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James
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      08-26-2007, 04:48 AM
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!

 
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Laura
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      08-26-2007, 11:43 AM
"James" <> wrote in message
news: ups.com...
> 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!


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.

 
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James
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      08-26-2007, 03:55 PM
Thanks Laura. That makes sense.

But what is the COA section?

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

-James

 
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James
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      08-26-2007, 08:22 PM
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

 
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