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De Offard
February 5, 2025
Question

Opening Balance to Personal Credit Cards Paid with Personal Money

  • February 5, 2025
  • 1 reply
  • 0 views

When I opened my business I was using my personal card for both business and personal expenses. I paid all expenses for the business with the business checking account and all personal expenses with my personal checking account. These cards are paid off each month. However, I am still showing a liability on my balance sheet for these accounts. How can I correct this with a journal entry to reflect these cards are not a liability? I know I need to credit one account and debit something else but not sure which account. I hope I am making this clear. I include a picture to show. The $1483.80 was the opening balance. Then I had $35.82 business expenses that were paid with the business checking and the personal expenses $1483.80 (which I paid off with my personal checking). However, I am still showing on the balance sheet for this year a liability of $1483.80, which I know this should zero. 

1 reply

JoesemM
JoesemM
February 5, 2025

While we generally advise against mixing business and personal funds , we understand that it can occur sometimes, De Offard. Let me share insights about it and provide guidance on how to create a proper journal entry for your records. I'll show you how.

 

To fix the liability on your balance sheet, you need to make a journal entry in QuickBooks Online to show that you paid off the credit card debt. This entry will involve debiting the credit card liability account and crediting your equity account. Since the payment came from your funds it reduces your owner’s equity in the business.

 

Follow these steps to make the journal entry:

 

  1. Click the + New, then click Journal Entry.
  2. On the first line, choose the expense account for the purchase.
  3. Enter the amount in the Debits column.
  4. On the second line, pick Partner's equity or Owner's equity.
  5. Input the same amount in the Credits column to balance, then click Save and new.

 

Once done, you can create a check or expense for the reimbursement. This ensures the transaction shows up as business expenses in your financial reports. 

 

Here's how:

 

  1. Click the + New and click Check or Expense.
  2. Choose a bank account to use to reimburse the personal funds.
  3. In the Category column, pick Partner's equity or Owner's equity.
  4. Enter the amount to repay.
  5. Select Save and close or Save and new.

 

Refer to this article for complete details: Pay for business expenses with personal funds. Also, I recommend consulting your accountant about the specific accounts involved. They can give you expert advice on which accounts to use and help ensure the transaction meets accounting standards.

 

Furthermore, utilizing QuickBooks Live Bookkeeping can significantly enhance your accounting practices by ensuring the accuracy of your financial records and providing access to professional support. This service not only helps streamline your bookkeeping process but also saves you valuable time when reconciling accounts and other matters that contribute to the growth of your business.

 

Once everything is properly recorded, you can now reconcile your account so they match your bank and credit card statements: Reconcile an account in QuickBooks Online.

 

You can always get back to us if you have any other questions about recording payments or any related questions about QuickBooks. I'm here to help. Stay safe.

D
De OffardAuthor
February 5, 2025
  1. On the first line, choose the expense account for the purchase. The opening balance ($1483.80) for this card was not business expenses so I don't have a place to allocate these. I paid this money directly from my personal checking account because they were personal expenses. I just don't know how to reflect this in my books. I am not sure I am understanding why I would then show a check or expense. The personal bank account is not tied to my QuickBooks account. Choose a bank account to use to reimburse the personal funds. Would I be adding them as a vendor?

  

L
LouiseG12
February 5, 2025

Thank you for highlighting that the opening balance of $1483.80 for this card does not pertain to business expenses, Offard. However, that is the method for managing expenses using personal funds in QuickBooks Online (QBO). Allow me to provide you with a more detailed explanation of how to effectively manage this in QBO.

 

To ensure your personal expenses are reflected in the system, you will need to create an expense account. If an expense account has not been established yet, it is necessary to create one to properly track and categorize these expenses.

 

Here's how:

 

1. Go to the Gear icon and click the Chart of accounts tab.

2. Tap the New tab.

 

3. Type in the Account name.

4. Pick Expense in the Account type. Once done, choose the Detail type from the dropdowns.

 

5. If this is a subaccount, you can click the Make this a subaccount, then select an expense Parent account it should be under.

6. You can add a Description. Then, click the Save icon.

 

For more info, check out this article: Add an account to your chart of accounts in QuickBooks Online.

 

In addition, there is no need to add a vendor in the system for recording a check or an expense, as these can be effectively documented without being linked to a specific vendor. Please know recording expenses or checks in the software is vital for keeping meticulous track of all financial activities, including personal transactions. This practice ensures that your bookkeeping remains organized and comprehensive. Having clear and thorough documentation is invaluable during audits, financial reviews, or when analyzing financial history for strategic planning.

 

Moreover, it is essential to consult an accountant to review your situation and ensure that your accounts comply with accounting standards and regulations. An accountant can provide expert guidance tailored to your specific needs. If you do not have an accountant, we recommend using our Find an Accountant tool to find a qualified expert near you.

 

Furthermore, after properly recording all transactions, you can proceed to reconcile your account to ensure it matches your bank and credit card statements.

 

If you have further questions or need additional clarity on managing personal and business expenses in QBO, feel free to reach out. Keeping your personal and business finances separate is essential for precise bookkeeping and meeting financial regulations. I'm here to assist you in navigating these complexities and ensuring your financial records are accurate and well-organized. Let's work together to maintain clear and precise financial records!

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