View Full Version : Home Business Startup - How To Enter Out Of Pocket Expenses?

07-14-2006, 04:56 PM
I have no bookeeping experience but am working my way through the QB Pro 2006 tutorials and starting to get the hang of this stuff.

What I don't understand yet though, is this:

I'm having to start my home business literally on a shoe string, out of my own pocket. I have to write personal checks and use my own personal credit card to buy things and pay for things ( like the state business license for example ), because the business has had no income yet to pay for it with.

I have no startup loan or anything, I'm poor and on disability at the present.

So how do I enter my expenses into the business account, so that they'll be calculated against any future sales in the profit and loss statements, for tax purposes etc?

I don't see a way to do this yet.


07-14-2006, 06:45 PM
There are 2 things to consider. Is the money to be invested in the business? Is the money a loan to the business? If it is an investment you make a journal entry of a debit (increase) into the expense account the purchase applies to, for instance, Postage. The other side of the entry is a credit (increase) to your Owner's Contribution account, which is an Equity type account. You should create this account and also an Owner's Draw account, which is also an Equity type account. The Draw account is used for money's you remove from the business for your use, which decreases your equity in the business.

Joe Williams
07-15-2006, 02:16 AM
I aggre with Suzanne. However to make the use easier for you, setup a Credit Card account for yourseld and enter Credit Card Charges for things that you purchase for the company. You can then journal the CC account balance to either Owner's Equity or the Loan from Owner at years end.

07-15-2006, 01:12 PM
I agree, but to clarify what Joe said, make a new Credit Card TYPE account called Loan from Owner and then use the Enter Credit Card Charges SCREENS to enter the activity transactions off your receipts so they have the correct payees and dates, etc. It's not a REAL credit card. We're just using the screens because you getter better detail into the program than you will by using Journal Entries. Also the total in that account will be a total of what you have spent so far and the amount the company owes you back if you decide to reimburse yourself.

Red5 Audio
12-07-2006, 10:50 PM
Hi Joey,

I'm setting up a new company in QB for a friend who's in a similar position, but I have a question about the bank deposit. He's used personal funds to register his LLC, pay for his occupational license etc., and open a bank account with $100 deposit. He intends paying himself back with a business check whenever he feels his business has generated enough income to cover his start-up expenses. Here's what I've done so far.

I created a CC type account, per your posting above and called it 'Loan from TS' then entered charges against it, showing the various payees and amounts. When I entered the $100, I showed Wachovia Bank as the payee and used Owner's Investment for the Account. I think I've got this part right so far but I would not be surprised if I've not. Anyway, here's my question: I obviously need to also show the $100 as a deposit into his newly opened bank account, so would I be correct to show Wachovia in the Received From column and Owner's Investment as the From Account? Would this create any other problem?

Finally, when he decides to pay himself back, do I use Write Checks and show the account as 'Loan from TS'?

Thanks for your help (and anyone else who wishes to contribute).

12-08-2006, 08:45 AM
Alistair - This is uncomfortable but unfortunately Joey passed away in October. Her presence on this forum is sadly missed and the rest of us will do our best to give as much help as we can. Regarding your post on another thread - thank you for your support of this forum and the folks who participate.
In answer to your question regarding the entry of the funds ($100.00) from the Owner to the company. You can make that entry on the Make Deposits screen as I think you already are doing. Use the owner's name in the Received From column and post to the Credit Card type account you set up in the owner's name. I would suggest you rename that account as Loans from Owner. That is different from an Owner's Investment account. An Owners Investment account is an Equity type account and is meant for money put into the business that will stay there, rather than an expectation of a payback. If you don't have that type account set up yet I would do that, but name it Owner's Contributions. If there is an anticipation that the owner will be removeing money from the company you should set up another equity type account for Owners Draws. To recap: The credit card type account is used for out-of-pocket expenses paid by the owner for the business; the Owners Contribution account is for investments into the company that will remain; the Owners Draw is for withdrawals from the company.

12-08-2006, 09:17 AM
I would suggest you use the memo line for every entry so the accountant or tax preparer will be able to sort out the transactions if needed. I believe in keeping it simple for a new and inexperienced owner and letting the tax preparer handle things like start-up costs. Just make sure there are notes so everyone knows what the expenses are for.

12-08-2006, 09:27 AM
To add clarification on the use of the memo line - you want to use the memo that's next to the expense line in the bottom of the check to explain that expense. The memo that shows on the actual check form is tied to the cash amount, not the expense (which can be useful too sometimes), but you really want your explanation with each expense line.

Red5 Audio
12-08-2006, 09:27 AM
Suzanne and Susana ,

Thank you very much for your replies. I'm so sorry to hear of Joey's passing. She will indeed be very much missed. It's been quite a few months since I've had a need to visit the forum and was unaware of this.

I appreciate the help you've both given and certainly agree about using the memo line as much as possible.


Red5 Audio
12-08-2006, 09:36 AM
To add clarification on the use of the memo line - you want to use the memo that's next to the expense line in the bottom of the check to explain that expense. The memo that shows on the actual check form is tied to the cash amount, not the expense (which can be useful too sometimes), but you really want your explanation with each expense line.

Thanks Lisa,

Yes, that's how I normally enter memos but I also sometimes copy and paste them into the check form, although I'm not sure if this is necessary.


01-30-2007, 10:12 AM
I have a related question. How do you simply post small cash expenses? Is it best to set up a petty cash account - and feed of this?