Here is a question I received about paying for business expenses with personal funds.
I am trying to set up a small company in quickbooks. The company has been in business for about 2 months.
When the company first started they had not set up a bank account for the business. Supplies were paid for through their personal bank account or by cash. How do I show those bills as paid without them going through the company bank account?
These transactions involves the owner of the firm, apparently, and not employees. So that is one assumption I will make. Sole proprietors, partnerships, and corporations all handle this kind of transaction a little differently. I will also assume that no inventory was purchased. If inventory was purchased these instructions will not give accurate results.
There are other ways, but here’s how I would do it for each type. First I would collect all of the receipts. Then I would open the General Journal (Company > Make General Journal Entries).
For the debits: I would use the date on the receipt and debit the expense account for the expense. For example, office supplies.
In the Description area, I would enter the method of payment (cash, credit card, etc), and also the last four digits of the credit or debit card if one was used. If a paper check was used, I would include the check number.
For the credits:
For sole proprietors, credit the Owner’s Draw account. It’s located in the Equity section. Create one if it’s not already there.
For partnerships, credit each partner’s investment account according to who paid what. If the investment accounts are not there, create them. They are Equity accounts.
For corporations, I suggest you credit a Shareholder Loan account. If you don’t have a Shareholder Loan account, create one as an Other Current Liability. The firm will need to repay the shareholder for this transaction.
Somebody else asked a similar question, but it involved using the Enter Bills window, which is a bit tricky to use because it is a two-step process.
I purchased an item for my sole prop. online. Payment was thru Pay Pal. Afterwards realized that my personal credit card was used in Pay Pal, not my business card.
I would like to record the transaction as a bill from the vendor then pay it, so I can keep up with all the business I have done with this vendor. But if I record the bill, QB won’t let me use personal cash as a payment source in pay bills. And if I use the general journal the payment doesn’t get matched with the bill/vendor.
It is possible to do this, but it is not straightforward. So I don’t recommend doing it. But here are the instructions. This assumes that the vendor bill has already been entered.
First, we record the payment that was made with personal funds.
1. Open the General Journal (Company > Make General Journal Entries). Use the date of the transaction.
2. Debit Accounts Payable the amount on the bill.
3. In the Memo field, enter the bill number, the payment method, last four digits of credit or debit card if used, or check number if used.
4. In the Name column, enter the name of the vendor as it appears on the bill.
5. On the next line, use the instructions above to determine which account to credit. It depends on how the business is held (sole proprietor, etc.) The amount should be automatically filled in by QuickBooks. Enter Owner’s/Shareholder’s name in the Name column.
6. Save and Close.
Now we need to apply the debit to Accounts Payable that we just entered to the bill that had been previously entered.
1. Open the Pay Bills window (Vendors > Pay Bills). Set the date to the day the the payment was made. This date should be after the date of the bill in QuickBooks.
2. Check the box next to the bill to be marked as paid.
3. Click Set Credits.
4. Check the Journal transaction you just recorded. Click Done.
5. If the bill was not paid in full, be sure the Amt. to Pay column is $0.00.
6. Click Pay Selected Bills.