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RaulUK
June 14, 2022

Accounting for Inventory Purchased Personally

  • June 14, 2022
  • 1 reply
  • 0 views

Hi everyone 👋

 

Quickbooks newbie here a few hours in. Thankfully, I think I'm getting it. However, I wanted to see if anyone would be so kind as to confirm my train of thought with the following...

 

Purchasing inventory to sell is my primary source of income for the business. Unfortunately, there was a massive delay with getting paid into the new business bank account (23 days!). This meant I didn't have any cash flow for purchases for those 23 days and ended up using money from my personal bank account to buy stock.

 

Now that everything is fine with our business bank account, however, I want to make sure that the money I spent is repaid by the business.

 

Would my best course of action be:

 

1. Invoice the company for each item of inventory purchased, e.g. invoice to pay £X,XXX within X days.

2. Categorised expenditure as "Purchases" on the Chart of Accounts. I would be the supplier.

 

Or would it be through a Director's Loan on the Chart of Accounts?

 

I guess where I'm getting a bit confused/clueless is... the inventory will be an asset for the business so it should be in the "Purchases" account, and if it's in the Director's Loan account, it would be a liability for the business... Which would then 0 itself out...?

 

Probably clear as mud, but any insight would be appreciated. Thank you 😊

    1 reply

    P
    payment after leaving
    June 15, 2022

    Hi RaulUK Thanks for reaching out to us here on the Community. We recommend that you account for the loan from yourself to the business as a loan and account for the purchases of the stock as expenses or bills. 

    To account for the loan you would: 

    select accounting > chart of accounts > new > account type will be current liabilities, if the amount is to be paid back within 12 months, if not then select Non current liabilities > in the detail type select current liabilities, if the amount is to be paid back within 12 months, if not select long term borrowings > enter a name > save and close.

    When you send your business the money/the business receives it into it's bank account you will:

    create a bank deposit from New+ > in the account field in the top left ensure that you've selected the bank that the amount was received to and the corresponding date in the date field > in the received from column, within the 'add funds to this deposit' section, enter/create you as a supplier, however this isn't mandatory > in the account column enter/select the liability account you created above. in the amounts are field select No VAT.

    When the business pays you the amount back, or a proportion of it, you will

    create an expense select the New+ icon > expense > enter/create you as a supplier in the payee field > in the payment account select the bank account the amount is being paid from > in the date field select the date the amount was debited from the business account > in the category column enter the liability account you created earlier > enter the amount of the loan in the amount column > in the amounts are field select No VAT > save and close.

    R
    RaulUKAuthor
    June 15, 2022

    Thanks, John. I think where I'm a bit stuck with your reply is that I won't be sending the company any money.

     

    I used my personal money to purchase stock. All I really want to do is account for that and make sure it's on the books for the business to pay it back.

     

    I tried following a video I found last night (https://quickbooks.intuit.com/learn-support/en-us/help-article/journal-entries/pay-business-expenses-personal-funds/L2hNmFDpt_US_en_US) but unfortunately, that didn't work as I was being forced to select the account type instead of being able to leave it blank as the video explains.

     

    I ended up creating a journal entry instead, whereby:

     

    Line 1. Debit £XXX to Inventory

    Line 2. Credit £XXX to Owner's Equity account

     

    Which seems to be what the video was ultimately trying to achieve. 😂

    P
    payment after leaving
    June 15, 2022

    Hi RaulUK Is the business going to pay you the amount back?

     

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