Bookkeeping 101: do yourself a favor and keep your business activities separate from your personal accounts. It's cleaner, easier to manage, and your accountant will love you for it. Like most things that's easier said than done. In today's Gig-economy, Uber drivers, Door Dashers, and freelancers haven’t taken the time to setup a proper accounting tracking system, and other times it's a mistake. Payment apps like PayPall, Venmo, and CashApp, allow you to connect multiple bank accounts. It’s important to setup separate bank accounts, one for business and one for personal but often this is not done.
A Couple different ways to address this
If you are a DIYer, Self-Employed may be a good basic option. QuickBooks Self Employed allows you to separate business and personal expenses pretty easily by swiping left. or right to move the transaction to personal or business. The functions are fairly limited and even though you can invite an accountant user, most accountants don't love it since there are fundamental accounting tasks (bank reconcile) that it doesn't do. So if you you are a DIYer, Self-Employed might be for you.
Setting up a Business Bank Account
It’s important to set up a separate bank account for your business. There are many considerations around fees and bank locations. At School of Bookkeeping we had these same concerns and solved them with by using Relay. We were setup in 30 minutes with virtual debit cards, and no minimums. The only downside you can’t print a physical check which is something we rarely need. The plus side is the QBO bank feeds are pretty phenomenal!
Handling a Business Expense paid with personal funds by mistake in QuickBooks
What do you do if you grabbed the wrong card and paid for something using personal funds? The answer depends on your business entity type. (Sole Prop, Partnership, S or C corp). This article speaks to Sole Prop or Partnership, for S or C corp, consult your attorney or CPA.
Enter a journal entry to enter the expense to the business and the offset is Owners Contribution. This will recognize the expense and show the owner contributed the funds in the form of ownership in the company. If you know this is just a loan, you can set it an account to follow the trail of reimbursement. Our course on QB setup for Desktop or Online walks through setting up these accounts..
What Happens Next?
If the owner is going to be reimbursed for it, a check from the business back account to offset the contribution (as a draw or disbursement) will net out the personal funds.
If this is something that happens regularly, and other option is to set up a "personal bank or credit card to record the expenses, and then zero out the balance on a regular (monthly or quarterly) basis to the equity account
If you would like to learn more tips and tricks, click here to access our entire course library!!
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