Recording Business Expenses Paid from Personal Account

LCPLCP Member Posts: 2

What is the best way to record business expenses paid from a personal account? I have an S-Corp and work from home so I attribute 7% of certain personal expenses to my business and track this via receipts in my business profile.

I had created a "Personal" cash and bank account in the chart of accounts under my business profile but it appears on my balance sheet, which doesn't seem right.

If I record them as a withdrawal from my business account then I'm unable to reconcile them with my business statements since they were paid from a personal account.

If I record them as owner drawings it looks like I double-dipped on my balance sheet since I transfer money from my business to personal accounts, which is also used to pay for these types of expenses.


  • MikegMikeg Member Posts: 936 ✭✭✭

    The most appropriate way to handle expenses paid for with personal funds is through a journal entry. The first thing I would suggest is to remove the Cash account you created. Only assets and liabilities that are those of the business should be presented. If you transfer money to yourself beyond payroll, then those payments are categorized as an owner draw (S-Corps call them Distributions). If you want to be reimbursed for let say home office expense, you should document your rationale as how you determined the amount and then do a journal entry to debit Office Expense and credit Owners Draw (Distributions). Shoot me an email and I will reply with a template I give to my clients to document Home Office Expenses. We then use that template to record the Home Office expense.
    Hope that helps.

    edited January 3, 2021
  • franc23franc23 Member Posts: 1

    I see another option listed here for reimbursements.

    Is there a difference between the two and if so, which one is better?
    I also see that Wave has been working on adding attachments to transactions - hopefully soon. That will let us document receipts in the same place as well.

  • JulianPJulianP Administrator Posts: 1,002 admin

    Hey @franc23 !

    The reimbursement Help Center article you attached is a guide on how to account for purchases made for your business by someone else. Your best bet here is to follow MikeG's owner drawing workflow. We have another Help Center article here that can shed some more light on this.

  • detailingkingdetailingking Member Posts: 6

    What does this example journal entry look like? debit to what and a credit to what?

  • MikegMikeg Member Posts: 936 ✭✭✭

    Debit the appropriate type of expense i.e. Office Supplies and credit either Owner Contribution or if you are treating as a loan, then credit Owner/Shareholder loan.

  • detailingkingdetailingking Member Posts: 6

    Thanks @Mikeg If these transaction got auto imported off my business checking (As I transferred the money from bus checking to "pay back" my personal account) The bank statement is showing as negative numbers from my business checking account. Should I delete those transactions and just key the JE manually instead?

    edited November 21, 2021
  • MikegMikeg Member Posts: 936 ✭✭✭

    I'm sorry I am a bit confused. What transactions were auto imported from business checking? If both the charges and payment were made from the business account then there is no need for a journal entry. Could you provide an example of a transaction?

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