Personal Expense on Business Account
I failed to follow one of the basic guidelines you mention on the web site. I charged personal items to the company credit card and paid the credit card bill from the business chequing account.
I would like to find a way (appropriate Quickbooks entries) to pay the company back from my Shareholder Loan without affecting a company expense account or the appropriate asset account.
I know this is not standard bookkeeping practice but I can't think of any other approach to clean things up and allow me move forward with a clean slate.
My company is incorporated and has been operating for 3 years now. I had a professional prepare my books for year 1. I used Quickbooks for year 2. I managed to keep everything separate in years 1 and 2. I'm the only shareholder in my company.
If you have any suggestions on how to clean things up I would greatly appreciate it.
Here are my questions to you:
Where did you code the personal expenses on the credit card?
Is your Shareholder account an asset account where you owe the corporation money ... or is it a liability account where you have lent the company money?
So for the purposes of my answer, I'm going to assume your Shareholder's Loan account is a liability where you have lent the company money.
When you processed the credit card statement, you should have coded your personal expenses to your Shareholder Loan account using the QuickBooks drop down menu for Bank> Credit Card or clicking on the "Enter Credit Card Charges" icon under Banking.
Your personal expenses can't ... as in cannot ... be charged to as an expense on your income statement as the expenses were not related to earning business revenue. CRA frowns ... :0( ... on this, as do third party lenders / investors. It is a definite NO-NO.
It should be understood that as the personal expenses can't be expensed by the company, the GST/HST taxes paid on these expenses are not eligible for input tax credits either.
To repay the personal amounts, write a cheque or transfer funds (both functions are under the banking menu in QuickBooks) from your personal bank account to your business bank account. Code the cheque or bank transfer to the Shareholder's Loan account.
The two sets of entries nil everything out ensuring no personal expenses were expensed as a business expense nor paid by the company.P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.