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How to account for personal cash used then reimbursed by contractor to business checking?

Forum|Forum|4 years ago
August 25, 2021
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Hello,

I am working with a Quickbooks Desktop Pro in a sole proprietor LLC file. This is a 1099 position (truck driver).

My client gave a fellow worker cash money (like a personal advance) for them to use for travel expenses in doing something for my client's contractor. That contractor had us submit the receipts/spreadsheet for that cash and then reimbursed those funds to my client's business account (even though I wish they could've given cash reimbursement).

My client incurred similar expenses that he used the business debit card for. None of these expenditures are business expenses for my client. I am using an asset account to record all of the reimbursable debit card charges of my client then using the same account for the reimbursement, bringing the balance to 0.00 for those purchases.

This cash is personal money stuck in the business account. Would someone please give me a step by step method for cleaning this up? Do I have to itemize the charges that the cash was used for? Probably making this too difficult. Please help!

QuickBooks Desktop

Best answer by ChristieAnn 11

Hi there, Momplusmore.

Welcome back to the QuickBooks Community. I appreciate you for sharing detailed information about your concern. When it comes to your business transactions mixing business and personal funds isn't recommended. However, we have options to follow on how to deal with this situation. With this, I'll ensure to share step-by-step methods so you're able to record the personal cash used and reimbursed by the contractor to business checking.

To start with, you'll have to create a liability account to have the expense transactions posted from there. This way, the contractor will be able to pay your client for the said expense for cash money that is given to fellow workers for them to use for travel expenses.

Here's how to create an account:

Go to the Lists menu at the top.
Choose Chart of Accounts.
From the Account dropdown, click New.
Choose an account type and select Continue.
Complete the account details.
Click Save & Close.

You can refer to this link for more details about creating an account: Create, edit, or delete an account in QuickBooks Desktop.

Next, I suggest creating a journal entry to record the expense that is paid for with personal funds. To ensure your records are in shipshape, I suggest consulting an accountant before performing the process. They can provide suggestions on how to properly handle the account, especially with the category to use for the debit and credit that needs to be equal.

Lastly, you can now record the reimbursement process to make sure that everything is cleaning up. To do this, you can either record them as a check or an expense.

I'm also adding some articles below to view various ways on how you can track customer transactions in QuickBooks Desktop. Then, how Accounts Payable is used to track the money you owe your vendors and how it works.

I'll be around to help if you have any other questions on how transactions act in QuickBooks. Just let me know by leaving a reply below. Wishing you and your business continued success!

C

ChristieAnn 11Answer

Hi there, Momplusmore.

Welcome back to the QuickBooks Community. I appreciate you for sharing detailed information about your concern. When it comes to your business transactions mixing business and personal funds isn't recommended. However, we have options to follow on how to deal with this situation. With this, I'll ensure to share step-by-step methods so you're able to record the personal cash used and reimbursed by the contractor to business checking.

To start with, you'll have to create a liability account to have the expense transactions posted from there. This way, the contractor will be able to pay your client for the said expense for cash money that is given to fellow workers for them to use for travel expenses.

Here's how to create an account:

Go to the Lists menu at the top.
Choose Chart of Accounts.
From the Account dropdown, click New.
Choose an account type and select Continue.
Complete the account details.
Click Save & Close.

You can refer to this link for more details about creating an account: Create, edit, or delete an account in QuickBooks Desktop.

Next, I suggest creating a journal entry to record the expense that is paid for with personal funds. To ensure your records are in shipshape, I suggest consulting an accountant before performing the process. They can provide suggestions on how to properly handle the account, especially with the category to use for the debit and credit that needs to be equal.

Lastly, you can now record the reimbursement process to make sure that everything is cleaning up. To do this, you can either record them as a check or an expense.

I'm also adding some articles below to view various ways on how you can track customer transactions in QuickBooks Desktop. Then, how Accounts Payable is used to track the money you owe your vendors and how it works.

I'll be around to help if you have any other questions on how transactions act in QuickBooks. Just let me know by leaving a reply below. Wishing you and your business continued success!

M

MomplusmoreAuthor

Thank you ChristieAnn for your prompt and thorough reply to my concern. Unfortunately, I'm still not clear on the final step as I understand it.

Here's what I summarize:

1. Create a new liability account for the expenses. I completely understand how that whole process works.

2. Create a journal entry debiting and crediting accounts equally for the expenses from the personal funds (using an accountant to get it right).

3. This I didn't understand: "Lastly, you can now record the reimbursement process to make sure that everything is cleaning up. To do this, you can either record them as a check or an expense."

I'm not sure what the "reimbursement process" is. Isn't recording the reimbursement be a deposit? If I'm recording them as a check or expense that would duplicate step 2, or am I mistaken?

In no part of this do I see the client pulling his cash reimbursement, since it isn't owner equity.

Would you please elaborate and clarify?

Angelyn_T

I appreciate your prompt reply, Momplusmore. I'm here to share with you some additional information about accounting for personal cash used for business expenses.

Yes, once you've used your personal account for business expenses, you have to record a check for reimbursement.

From the Check or Expense window, select a bank account you'll use to reimburse the personal funds.
In the Expenses column, select Partner's Equity or Owner's Equity.
Enter the amount of the reimbursement.
Save the transaction.

On the other hand, you can record a deposit when reimbursing personal expenses paid from a business credit card or bank account.

Go to the Banking page.
Tap on Make Deposits.
Select the account to add the reimbursement from the Deposit To dropdown, then input the Date.
In the Received From field, enter the person who made the personal expense, then select the account. You can add the person as a customer if they aren't in your books already. Even if they're not a customer, this is the best option.
Select the Payment Method, then enter the reimbursement amount.
Tap on Save and Close.

For more tips about handling personal and business expenses you can check out these QuickBooks Online articles (the same scenario works for QuickBooks Desktop):

You can also get more tips about managing your QuickBooks transactions through this link: Help articles, video tutorials, and more.

If you have any other follow-up questions about recording your business and personal expenses, let me know by adding a comment below. I'm more than happy to help. Cheers for more success!

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