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ericmday
July 1, 2022
Question

Personal Expenses

  • July 1, 2022
  • 1 reply
  • 0 views

Hello. Sorry for being new. I need to know what category i put transactions of a personal nature. In other words, If i use my business credit card to purchase an item for myself, what category do i put that transaction? I see PERSONAL EXPENSE: EXPENSE, and PERSONAL EXPENSE: EQUITY. 

Again, these transactions are not related to my business but are of a strictly personal nature.

Should these transactions make my profit go down/decrease?

I tried putting them all into OWNER DRAWS: EQUITY and my expenses soared and am showing a big loss. Is this correct?

    1 reply

    Rootwork IT
    Rootwork IT
    July 2, 2022

    Hi Eric,

     

    I don't know the answer (sorry) but I do know that mixing personal and business expenses can put you at serious financial risk. Here's how and why.

     

    Normally, having an incorporated business protects your personal assets from liability. So if a customer sues you for something, they can try to take your business assets but not, for example, your house. However, if a lawyer subpoenas your business transactions and can show that you have intermingled your personal finances with your business, a court can rule that you are operating as a sole proprietor (despite being incorporated) and allow the person suing you to make claims against your personal assets.

     

    You can learn more about this by search the web for "piercing the corporate veil".

     

    Sorry for being nosey and not having the answer you're looking for, but hopefully it this was helpful in a better way!

     

    Mike

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      ericmdayAuthor
      July 2, 2022

      Thanks, Mike! You make some interesting points. I’m a sole proprietorship, selling 100k gross per year on eBay. Average sale, $35.  I purchase things for myself on a credit card. The proceeds I earn from eBay I use to pay my credit card down. So like: I buy some worms for fishing for $5. That’s not for the business; it’s for my own enjoyment, fishing. With what I sell from eBay I pay the credit card down. The credit card debt is both personal and business-related. I have no idea what category in QBO I put that $5 purchase of worms. I want to do the right thing, but I haven’t yet figured out what that right thing is. 

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      ericmdayAuthor
      February 11, 2023

      half a year later, still no answer

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