The first QB QuickTip is about one of the most common situations in EVERY small business! That’s when personal funds and business funds collide.
In this case, it is when the owner pays for a business expense out of his or her own pocket and then it needs to be captured by the business. And assuming that the owner is NOT just going to leave his personal funds in the business, today we’ll show how you can….
1. Easily track any business expenses paid out of pocket
2. How you can get the money back (if you are the owner who is shelling out the money)
Click the > button at bottom left to play the video
Great question! Yes, because the amount owed to the owner is kept track of in a liability account, it stays on the books as an amount that the business owes. It is a debt that needs to be paid. And like with any other debt, it can be paid when the funds are available. But that really doesn’t need to be tied to profits (though it is understandable why you would want to wait until the company is profitable and stronger, as long as you can wait for the business to pay you back). But in the most simple terms, being reimbursed is more dependent on cash flow.
I have a question now. Lets say I have a vendor bill. I’d like to pay for that with my (the owner’s) personal credit card and be reimbursed later. I have tried the method you showed, however, I cannot figure out how to use those funds to credit the bill. Care to suggest something?
I’ll be more specific, I have a $1300 bill, the $500 deposit I paid from my personal funds, the $800, I paid by company cheque when the invoice was formally provided. It seems that the $800 was applied to the bill, however, that $500, I cannot figure out how to apply it to the bill.
How about reimbursing owner for foreign currency purchase? I can’t use the amounts owed to owner to pay a foreign currency vendor, and I also can’t create a other current liability account in a foreign currency, seems like I need an intermediary step somehow.
Several comments from your first two posts:
1. Credit card payments using your personal credit card should be treated the same as anything else you pay for out of personal funds; same as if you paid with cash. You will NOT track your personal credit card in your business records. As you mentioned, you would use the same process as shown in the video to capture the amount owed back to you from the business.
2. In your scenario where you have a bill for $1300, if the initial deposit was paid from personal funds (as shown in the video, capturing the $500 as an expense) before you received the vendor’s bill, the deposit should already be credited by the vendor against the bottom line amount owed on that bill. If you are using the A/P function in QuickBooks (Enter Bills / Pay Bills) you should only enter the bill at the bottom line amount owed (since you already recorded the prepayment expense and amount).
If, however, the vendor’s bill does not show the deposit amount already paid on their bill, you will need to create a credit for that vendor in the amount you already paid against that bill (in your case, $500), coding it to the same expense account as the prepayment deposit check.
Then, when paying the bill, you will use the Set Credit button to apply that credit against the full bill, and paying the difference ($800) as you described above in your first post.
Do not choose the A/P account as you mentioned in your 2nd post. Let QB do the double-entry bookkeeping for you behind the scenes so that the debits and credits are handled correctly to track your expenses and your liabilities.
Finally, regarding your third post, if you are dealing with foreign currency, you need to be using QB 2009 or 2010, using the foreign currency preference. (Once you turn that feature on, you can never turn it off, btw) As far as what you can and cannot do with the foreign currency is beyond the scope of this post, but if you need further guidance, contact me through my website at http://www.bookkeepingdirect.com/contact.html
Good questions. But just remember to keep things as simple as possible, and you’ll do fine.
Thank you so much. You answered the exact question I was wondering about. Although I use Quicken Home and Business, I was able to apply your answers to this software as well. Thanks again, you were extremely helpful =)
Thank you very much for your video, you can’t imagine how GREATLY your video helped me! I am a new QB user, every step would take me forever to accomplish if without this video!! I am now your loyal fan waiting for your new videos ! thanks again
When you are talking about business expenses, you do not need to break out the sales tax separately. It is included as part of the cost of whatever was purchased. It should not be part of the sales tax reporting in QB. Sales tax in QB is for the taxes you collect on sales (not the sales tax you pay on purchases for the business).