Paying for Business Expenses With Personal Funds
When you or a business partner pays for company expenses using personal funds, you need to record the transaction correctly so your books are accurate and you can track the reimbursement. This process involves two steps: recording the expense and then recording the reimbursement.
Step 1: Record the business expense
Use a journal entry to record the expense and increase the amount you owe to the owner or partner.
- Select + New.
- Select Journal entry.
- (Optional) Change the Date and enter a Journal no..
- On the first line, enter the details for the expense:
- Account: Select the appropriate expense account (e.g., Meals, Travel, or Supplies).
- Debits: Enter the amount of the purchase.
- Description: Enter a description (e.g., the vendor name).
- Name: If you want to associate the expense with a specific customer/job, select the customer. Otherwise, leave this field blank.
- On the second line, enter the details for the funding source:
- Account: Select Owner’s Equity or Partner’s Equity.
- Credits: Enter the same amount as the debit.
- Description: Enter a note such as “Reimbursable” to help you identify the transaction later.
- Select Save and close.
Note: Only include the business portion of the expense. If you made personal purchases at the same time, do not include those costs in this entry.
Step 2: Record the reimbursement
When you pay the owner or partner back, record the payment using an expense.
- Select + New.
- Select Expense.
- In the Payee field, select the owner or partner you are reimbursing.
- In the Payment account field, select the bank account or petty cash account you paid from.
- In the Payment date field, enter the date of the reimbursement.
- In the Payment method field, select how you paid (e.g., Check, Credit Card, or Cash).
- In the Category field, select the same Owner’s Equity or Partner’s Equity account you used in the journal entry.
- Enter the Amount of the reimbursement.
- Select Save and close.