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Guidance on adding "Owner's Equity" transactions for a large number (400+) of already categorized transactions from a personal credit card.

Forum|Forum|2 years ago
March 24, 2024
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We've been mostly incorrectly using quickbooks for the last few years. Because my taxes have been taking me several days to get prepared for my accountant, I decided to get our books in order. I've reconciled the business bank account and primary credit card going back 3 years, so that's all in good shape.

Unfortunately, we do have some business expenses paid for through one of our personal accounts. Right or wrong, I connected this account to QBO and imported the transactions. I went through every single transaction and determined if it was personal (excluded) or for the business (categorized against the existing payees and chart of accounts). I learned recently that I should also be counting these transactions as "Owner's Equity" through a second line item in the transaction.

I don't see an easy way to perform a bulk operation to create entries for "Owner's Equity" to offset all the already categorized transactions. However, I should be able to export all the categorized transactions from the bank register into an excel file, modify the file to negate the amount (basic formula would be, =A2 * -1) and reimport all the transactions assigning them to the "Owner's Equity" account. My question is, will an export and a subsequent import create a material difference than if I went back through all 400+ transactions and "split" those transactions by adding a 2nd line item. For example, I think the ledger would need to read something like based on the example I found at https://quickbooks.intuit.com/learn-support/en-us/help-article/journal-entries/pay-business-expenses-personal-funds/L2hNmFDpt_US_en_US
Category, Description, Amount
Line 1: 5100 Supplies Account, Target, $5.00
Line 2: 2100 Owner's Equity,, -$5.00

Unfortunately, the only way I can see to add that 2nd line item is to individually go through all 400+ transactions and update them. I really want to avoid doing this. I don't expect the business to reimburse my wife and I for any of the equity. Is there a faster way to do this? Will exporting the existing transactions, modifying in excel and reimporting work just as well? If not, there an acceptable "catch-up" method I can use to get this current and start doing it correctly moving forward. Any help/ideas you can provide are welcome. As you can probably tell, I don't have much of a background in accounting/bookkeeping! Thanks in advance!

QuickBooks Online

Best answer by Rainflurry

@HeHasBareFeet

"Right or wrong, I connected this account to QBO and imported the transactions. I went through every single transaction and determined if it was personal (excluded) or for the business (categorized against the existing payees and chart of accounts). I learned recently that I should also be counting these transactions as "Owner's Equity" through a second line item in the transaction."

If you connected the bank account and imported expense transactions, then don't you have a negative bank balance that incorrectly (it's a personal account on your balance sheet) offsets all of these transactions? Run a balance sheet report and see if you do. If so, the easy fix for this is to create a journal entry that reclassifies that erroneous negative bank balance to Owner's Capital (equity) with a journal entry: debit the personal bank account and credit Owner's Capital (equity) for the balance. That will zero out the bank balance and increase equity by a corresponding amount.

L

LeizylM

I understand the importance of categorizing transactions correctly under Owner's Equity in QuickBooks Online (QBO). I'm here to share insights about this.

We can export the 400+ transactions from the Categorized tab. Please note that this is the file you will use when reimporting transactions.

Once done, exclude these 400+ transactions from the For Review tab. When importing a CSV file into QBO, there's a certain format that we need to follow. For more information about the accepted CSV file format, check out this article: Format CSV files in Excel to get bank transactions into QuickBooks.

On the other hand, if you want to categorize without splitting the transaction, you can reverse all values. If you still have the original copy of the transactions. This way, you won't have to edit the offsetting amount and can set up bank rules to allocate them to the Owner's Equity.

Also, you can create bank rules in QuickBooks to help speed up the categorization process. Please check this article for more details: Set up bank rules to categorize online banking transactions in QuickBooks Online.

I'd still suggest consulting an accountant. This way, they'll be able to help categorize transactions in QBO.

Feel free to seek assistance if you encounter any challenges during the process or need further guidance on categorizing your transactions. I'm always here to help. Have a great day.

H

HeHasBareFeetAuthor

I'd like to keep the original categorization of these transactions because it shows where the money actually went. If I assign them all the "Owner's Equity," I will lose the accurate vendor reporting when generating P&L reports. I would imagine that's why the recommendation in the article is to add a 2nd line item to zero out the expense via an "Owner's Equity" line item. This way, you get the ability to see how much addition out of pocket you're putting into the business while preserving the audit trail of where the dollars are actually going.

I am already using bank rules. However, I don't see any option in the rules to do something like "if match, split transaction" or "if match, add a new (-1*amount) transaction and assign to 'Owner's Equity'". It would be great if something like this existed.

Can you clarify what you mean here? Are you suggesting that I am actually able to split transactions via a CSV import? If so, can you please provide an example? As far as I can tell, each CSV line will equal a single transaction, even if I were to use the 4-column format.

I can very easily duplicate all the 400+ transactions, negate them and simply assign them all to the "Owner's Equity" category as a separate transaction. Will this break any sort of Accounting rules or business reports/reconciliation processes? If not, this seems to be the easiest solution but it's not what's recommended in the linked support article, so I am hesitant to take this step if it's going to result in inconsistencies in the accounting.
On the other hand, if you want to categorize without splitting the transaction, you can reverse all values. If you still have the original copy of the transactions. This way, you won't have to edit the offsetting amount and can set up bank rules to allocate them to the Owner's Equity.

S

Sherrie_F

I can see how beneficial it is to keep the original categorization of the transactions, cparsons.

Let me provide some ways and make it up by explaining why there's no option to offset the whole amount on the Banking page.

In QuickBooks Online (QBO), the split transaction is designed to allocate multiple categories wherein the total amount must be equal to the amount of the transactions. Splitting the transactions via CSV import isn't possible.

However, it's best to create a journal entry upon entering your transactions. It lets you move money between accounts and force your books to balance in specific ways.

Here's how:

Select +New.
Choose Journal entry.
On the first line, select an account from the Account field. Depending on if you need to debit or credit the account, enter the amount in the correct column.
On the next line, select the other account you're moving money to or from. Depending on if you entered a debit or credit on the first line, enter the same amount in the opposite column.
Check the amounts - you should have the same amount in the Credit column on one line and Debit column on the other. This means the accounts are in balance.
Enter information in the memo section so you know why you made the journal entry.
Select Save and new or Save and close.

You can also seek assistance from your accountant if you need further guidance categorizing the transactions in your QuickBooks Online account. If you don't have one, you can use our Find-an-Accountant tool to look for an expert near you.

Additionally, here's an article you can browse through in case you need assistance on how to reconcile your accounts so they always match your bank and credit card statements: Reconcile an account in QuickBooks Online.

If you still have further queries managing your transactions in QBO, feel free to let me know. I'd be glad to assist you 24/7. Stay safe.

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