Business Expenses Paid Through Personal Account

Claiming GST on Corporate Business Expenses Paid Through a Personal Account

Claiming GST on Corporate Business Expenses Paid Through a Personal Account

How does it work when a small corporate business owner has registered for GST, but all expenses have been paid through her personal account?


For all of her business purchases I have entered them as journal entries, debiting the expense account and crediting the 'Due to Owner' liability account. (There was very little revenue in the first year of business so she was unable to pay through the business account).

Do we only record & claim the GST when her personal account is reimbursed? Or is there another method where she can claim her ITC's sooner?



section divider



Well the first thing I have to say is that you need to educate and gently push your client to open a corporate business bank and obtain a credit card that she uses only for business purchases. That is a MUST particularly since she is an owner-manager and not a sole proprietor. For all business owners out there, if you are lazy and sloppy with paperwork, do yourself a favor and don't bother incorporating.

When starting your business there will be a lack of cash-flow. The way to deal with this is to make a capital contribution (a shareholder's loan) to your business ... I.E. provide it with some seed money. Make a deposit to your business with a cheque (or direct transfer) from your personal accounts. That way you can easily keep your business and personal finances separate.

As that wasn't done in this case, see my chat on the use of personal credit cards for business for more information on why business owners want to keep personal and business expenses separate. Maybe print it out for your client or provide the link.

Next, I really want to encourage you to NOT enter business expenses through a journal entry. Most accounting software has modules that need to be used if you want your reports and taxes to report correctly. See how I handle the "Owed to Owner" account here - Owed to Owner and Expense Reports.

Once your client submits her expense report (with supporting receipts attached), you key it in through the credit card module receipt by receipt (not lump sum). At this time you should be recording the sales taxes accurately and correctly. How and when she gets reimbursed does not factor into the timing of claiming ITCs.

At the end of the appropriate sales tax reporting period (annual, quarterly, monthly), run your sale tax report provided by the software. If you've done everything correctly, it will report and claim the appropriate amount of ITCs.

Hope that helps. If not, please comment back.

Click here to post comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Home Business Taxes.

Enjoy A Tea Break With
Me Today. Let's Chat!

Use the search feature to quickly find the
information you're looking for.

Like this page? Please let Google
know by clicking the +1 button.






 Keep Your  eDocuments Safe And Secure… $7 USD
Version 2 now out
Bigger and Better



SHORTEN
Your Learning Curve!

Buy Now



Warm up your tea cup and check out these chats ...

Click on image above to read the chat.






Purchasing These Products Through My Links Helps To Support This Site

Click on image above for my review.






Join Me On Facebook

Help support this site by "liking" me! Here's where I post current information.

Listed Under Websites NOT Local Business.
This website is not associated with the business operating in Bonnyville AB.






A Handy Reference

Buy Now