Reimbursing yourself for business expenses

Does this sound familiar? You’re in your favorite office supply store. You’re buying school supplies for your kids and printer cartridges for the printer you use for your business. You put it all on your personal credit card. Then how do you reimburse yourself for those cartridges from your business funds so that money goes back into your pocket? Those little guys are expensive!

If you pay for company purchases or assets with a personal check, credit card, or cash, you have, in effect, made a “loan” to your company. You can track these purchases in QuickBooks with an Other Current Liability account.

A couple of things before we move on:

  • I need to make our lawyers happy. The information in this article is not meant to be accounting advice. This is only to show you how to track transactions in QuickBooks. It’s a good idea to talk to you accountant if you have questions about paying for your business expenses with personal funds and vice versa.
  • This article is meant to help you keep your business finances separate from your personal finances, not merge them together. It’s really not a good idea at all to track your personal finances with your company’s.

Now that we’ve got that out of the way, let’s get to it.

Setting up your tracking account

In your Chart of Accounts, create a new account using the type Other Current Liability. You’ll use this account to track all the money you spend in a mixed business and personal fund situation. If your company is a partnership, you may want to set up an account for each partner.

Some things to know:

  • In this example, I named the account “Company Owes Me” but you can name yours anything. But I’ll refer to this account as “Company Owes Me” in this article.
  • Be sure to enter any opening balance if there is any.

Record business expenses you paid for with personal funds

This is the scenario we started out with, paying for your kids’ school supplies and your company’s printer cartridges with your personal credit card. To track this, record the transaction in your “Company Owes Me” account register. This shows that the business now owes you this amount. You can do this for  transactions that happened in the past as well as current transactions.

  1. First, open the register on your “Company Owes Me” account.
  2. In the Increase column, enter the amount you spent for your company and tab to the next line. If you also bought personal items in the same transaction, you don’t need to enter those items or amounts.
  3. In the Account field, select the appropriate expense account. If the amount you are entering is for more than one expense account, click the Splits button. In the Splits window, associate the appropriate portions of the check to the appropriate accounts. (In the screenshot below, you’ll see how I did this in a sample company file.)
  4. If anything you bought is reimbursable by one of your customers, or if you want to associate the expense with a particular customer:job for a job report, choose a Customer:Job name.

Reimbursing yourself

If your “Company Owes Me” account has a positive number, then your company owes you money. You can reimburse yourself in either of these two ways.

  • Write a business check for the money owed to yourself. Use Write Checks. Enter your name in Pay to the Order of and the amount owed to you. In the Account column at the bottom, select “Company Owes Me.”
  • Reinvest the money in your company by moving it to an equity account. If you have only one equity account, as many businesses do, use that equity account in the following procedure. If you have several equity accounts or subaccounts, use the account you use to track investments, since you’re now investing this money in your company.

To transfer the money to an equity account:

  1. Choose Banking > Make General Journal Entries.
  2. In the Account column, choose your version of “Company Owes Me” from the list.
  3. In the Debit column, enter the amount remaining in the account.
  4. In the Account column, choose the appropriate equity account from the list. You can QuickAdd this account if you don’t have one already set up for this purpose.
  5. In the Credit column, enter the amount to be credited to this account (this will be the same amount as you entered in the Debit column).

It’s a good idea to zero out your “Company Owes Me” account at the end of the year, since this liability is not relevant to your business’s financial health as a liability to a bank or credit card company would be. Also, if the company owes you at the end of the year, rather than you owing the company, your liability will have a negative balance, which would look odd on your balance sheet reports.

So that’s how you reimburse yourself. This is a very common scenario for many of you, so I hope this makes things a little more clear.

About Shelly King

Shelly King works for Intuit as a member of the QuickBooks for Mac team. She’s the Managing Editor for Little Square and its main contributor. Shelly grew up in the South until 1994 when the Internet called her to Silicon Valley. She’s done a lot on the web ever since. Little Square was her idea. Yep, it’s all her fault. See all of Shelly's articles

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