We've all done it. Charged something personal through the business. What to do?
Sometimes it can't be avoided. A personal transaction goes through your business accounts. Maybe it was by mistake. Maybe it was to take advantage of a professional discount. Does not matter. This is how to deal with it in your books.
- In your Chart of Accounts, check to see if there is an account in the 'Bank and liquid assets' section called 'Personal Expenses'. If one is not there please create it. (see instructions below)
- Go to Bills and create an entry for the personal charge and assign it to the 'Personal Expenses' account. If you've already created the bill confirm expense category assignment. Update as needed.
- Now you owe your company money.
- Next, create a Journal Entry transferring that charge to your 'Owner Draws' account, effectively reimbursing the company for a personal expense.
Our accounting staff recommends closing all such accounts by the end of the month at a minimum so you don't lose track of them.
Fields explained (in order)
- "J" - stands for 'journal entry' (system default)
- transaction number - system generated
- date - change the date to the day the transaction was completed (if necessary)
- paper clip icon - attach documentation (if desired)
- Description - write whatever description would be sufficient so you and your accountant can understand transaction in the future
- Account - select the personal expenses account in Chart of Accounts
- Debit - leave blank
- Credit - the amount for the transaction(s)
- Balancing cccount - select your Owners Draw account in Chart of Accounts
click on transaction(s) checkbox
click green "Approve selected" button
How to create the Personal Expenses account
- go to Accounting > Chart of Accounts
- click on the green "Create Account" button on the top right of the page
- select 'Create Account' from the menu
- complete the form - feel free to use own label and description
- be sure that 'Enable payments to this box' is not checked.
- save account