Accounting for Personal Expenses in QuickBooks
As a rule, business funds and personal money should never mix. This is especially true for corporations and LLCs. Mixing personal and business funds for these entities could raise legal questions, not just accounting problems. For more information on this issue consult an attorney or tax professional in your area.
The reality is that most small businesses owners will at times pay for a business expense with personal money or pay a personal bill with business funds. Some sole proprietors don’t separate personal and business activity at all, using just one checking account for both. (I can not recommend against this enough.) Here’s how you can handle the occasional overlap while keeping your financial statements readable and meaningful.
Scenario 1 - Business expense paid with personal funds.
The easiest way to account for this is by writing a business check to the owner (or whoever paid the expense) using the account fields on the check to properly distribute the expense. You can also use an expense report / reimbursement form to document and track several purchases and reimburse all at once.
At other times, the business does not have the money to pay certain expenses and these are not paid back to the owner immediately. In this case a bill may be entered for payment later. In the case of sole proprietors, if the expense will not be repaid a credit can be issued for the bill using the Owner’s Contributions (or other owner’s equity) account.
Senario 2 - Personal bill or expense is paid with business check.
This is mainly an issue with sole proprietors. Ideally this business would write a “draw” or payroll check to the owner, then the personal bill would be paid from this personal money. Skipping the step of payment to the owner does not change the accounting. These types of transactions should be recorded using the “Owner’s draw” or other equity account.
Whatever action you take to account for these transactions, always use the memo fields and/ or notes on the original paperwork to document what was done and why. In case of an audit or other examination, these notes will help you explain any irregular looking transactions.
Need a better way to track personal expenses? Try Quicken Personal Online Edition for Free.
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Emailing Reports and Forms from QuickBooks
One of the new features in QuickBooks 2008 is the ability to send invoices and other forms directly from QuickBooks with Microsoft Outlook or Outlook Express. There is a fairly simple way to do this in current versions of QuickBooks. And you can use any email program.
With the form (invoice, sales receipt, estimate, purchase order, sales order) or configured report in the top active window, select File then click Save as PDF. Save in your documents folder or other location of your chosing.
After saving, you can attach to any email you send. The benefits to this method are being able to send multiple forms and reports in one email and having a record of when and to whom the email was sent.
