Best way to record business expenses paid for with personal funds

Steve176@

I have Quicken personal and business accounts.  The business is new so we are spending from personal funds for supplies, building improvements and other expenses.  I want to track these expenditures but don't think they should be in the business checking account because that's not where they were paid out of.  Would it be acceptable to create a "cash" account and use it to record the expenses?  Nothing else would go in this account, only personally funded business expenses

NotACPA

Quicken determines what's Business vs what's Personal NOT by the account used ... but rather by the TAX LINE associated with the Category used.  And you can't assign a Tax Line to an account.

SO, you can walk into a hardware store and buy lumber, which you charge to a category designated as business, AND on the same purchase buy a magazine, which you charge to a personal category.

Q can keep it straight if you follow those rules.

Unknown

Is the business "sole proprietorship"?

If so then there is only one tax identity and so it doesn't matter what account is used to pay for the expenses.  You will want to use a category attached to a schedule C tax item though.

Steve176@

Here is the twist.  If I am going to hardware store for some basics, screws, nails etc, I will probably pay cash.  Bigger expenses like a new garage door would be off a personal credit card which I am not managing in quicken. 

As of right now,  have personal checking & savings, business checking, a rental property and a "cash In" account where I am recording out of pocket expenses.

I know I could create an AP account instead of the Cash In but Quicken seems to want to tie every transaction to a funding account so that would not work in my case.

NotACPA

Steve said:

Here is the twist.  If I am going to hardware store for some basics, screws, nails etc, I will probably pay cash.  Bigger expenses like a new garage door would be off a personal credit card which I am not managing in quicken. 

As of right now,  have personal checking & savings, business checking, a rental property and a "cash In" account where I am recording out of pocket expenses.

I know I could create an AP account instead of the Cash In but Quicken seems to want to tie every transaction to a funding account so that would not work in my case.

You can still split that Cash payment (recorded in your Cash Account) and use categories appropriate for the purchase.

And, why aren't you managing that Card in Q?  Because if you have both personal and business expenses there ... how else are you going to get a complete accounting?

I also don't understand your terminology "Cash in" account. Doesn't it represent the cash that you've got in your pocket (or some other place) ... but actual CASH?

Unknown

Steve
I agree that using categories to separate the ins and outs of any account is the way to go.  A cash account does allow you to track ins and outs of cash only transactions.  I don't agree that categories are based on the tax line.  That's just another view (ie categorization) of the same transactions.  I also encourage the usage of tags.

Unknown

Robert Freeman said:

Steve
I agree that using categories to separate the ins and outs of any account is the way to go.  A cash account does allow you to track ins and outs of cash only transactions.  I don't agree that categories are based on the tax line.  That's just another view (ie categorization) of the same transactions.  I also encourage the usage of tags.

 I don't agree that categories are based on the tax line.  
.

The main reason for using categories with the right tax line is to let Quicken know how to deal with a given transaction for the tax reporting/exporting to your tax program.

For instance if I select a category that has a tax line of schedule C it will separate out that category into the custom category group for Business.  Using the correct tax line is also how rental property transactions are separated out.

Note you can create your own categories and assign them the correct tax line.

Unknown

Robert Freeman said:

Steve
I agree that using categories to separate the ins and outs of any account is the way to go.  A cash account does allow you to track ins and outs of cash only transactions.  I don't agree that categories are based on the tax line.  That's just another view (ie categorization) of the same transactions.  I also encourage the usage of tags.

I fully agree that the assignment of the tax line can make tax time easier, but for us that like to hand enter the data into TurboTax or equivalent it's just not a requirement.

NotACPA

Robert Freeman said:

Steve
I agree that using categories to separate the ins and outs of any account is the way to go.  A cash account does allow you to track ins and outs of cash only transactions.  I don't agree that categories are based on the tax line.  That's just another view (ie categorization) of the same transactions.  I also encourage the usage of tags.

I don't agree that categories are based on the tax line.

You misunderstand.  Q's determination (in reports, primarily) of what's business vs what's personal is based ENTIRELY upon the tax line assigned ... which is a one time action (per category).

It's not categories that are "based on the tax line" ... it's Business vs Personal that is based on the tax line.

Unknown

Robert Freeman said:

Steve
I agree that using categories to separate the ins and outs of any account is the way to go.  A cash account does allow you to track ins and outs of cash only transactions.  I don't agree that categories are based on the tax line.  That's just another view (ie categorization) of the same transactions.  I also encourage the usage of tags.

i have used QW H&B since 1999 and have never used the tax lines.  I have created many categories under Business and that's all that's needed to keep personal and business separate.

Sherlock

Robert Freeman said:

Steve
I agree that using categories to separate the ins and outs of any account is the way to go.  A cash account does allow you to track ins and outs of cash only transactions.  I don't agree that categories are based on the tax line.  That's just another view (ie categorization) of the same transactions.  I also encourage the usage of tags.

And how did you create many categories under Business?

Unknown

Robert Freeman said:

Steve
I agree that using categories to separate the ins and outs of any account is the way to go.  A cash account does allow you to track ins and outs of cash only transactions.  I don't agree that categories are based on the tax line.  That's just another view (ie categorization) of the same transactions.  I also encourage the usage of tags.

I have created many categories under Business
.

Are you talking about the category group of Business?

Here is an in interesting fact.  I have always used Deluxe or Premier.  By default the category group Business will not show up.  But just add one category with a tax line set to a schedule C line, and the Business groups will appear.  Same kind of thing happens for the Rental category group.

Unknown

As long as you have a Business checking account,  why not occasionally transfer funds from your personal account into the Business account and simply pay all business related expenses out of your Business checking account?

NotACPA

Joe Hutchins said:

As long as you have a Business checking account,  why not occasionally transfer funds from your personal account into the Business account and simply pay all business related expenses out of your Business checking account?

This is unnecessary, since the business under discussion appears to be a Schedule C/E/F affair.

The business, therefore, would be reported on the individuals tax return ... because the individual and the business are a single tax entity.

Also, the OP has already stated that he mixes the accounts that he pays personal and business expenses from ... so your suggestion comes after the horse has already left the barn.

Steve176@

Steve said:

Here is the twist.  If I am going to hardware store for some basics, screws, nails etc, I will probably pay cash.  Bigger expenses like a new garage door would be off a personal credit card which I am not managing in quicken. 

As of right now,  have personal checking & savings, business checking, a rental property and a "cash In" account where I am recording out of pocket expenses.

I know I could create an AP account instead of the Cash In but Quicken seems to want to tie every transaction to a funding account so that would not work in my case.

Cash In is the name I gave to an account I created to track expenses from non-business sources, i.e. personal funds.

I only want to use Quicken for the Business and not the personal stuff.

Unknown

Steve said:

Here is the twist.  If I am going to hardware store for some basics, screws, nails etc, I will probably pay cash.  Bigger expenses like a new garage door would be off a personal credit card which I am not managing in quicken. 

As of right now,  have personal checking & savings, business checking, a rental property and a "cash In" account where I am recording out of pocket expenses.

I know I could create an AP account instead of the Cash In but Quicken seems to want to tie every transaction to a funding account so that would not work in my case.

Well if you are not going to track the personal accounts in Quicken, but you are going to use personal funds/accounts to pay for business expenses you will have the problem of "where did the money come from".

You could do that with changing the opening balance transaction on your cash account or just record a transaction where the category is the name of the account you are in enclosed in square brackets like [Cash].  This means that the money came/went from outside of Quicken.

Other than that NotCPA to me it seems like you just have to record the expense using a category linked to the right tax line.

Steve176@

Joe Hutchins said:

As long as you have a Business checking account,  why not occasionally transfer funds from your personal account into the Business account and simply pay all business related expenses out of your Business checking account?

My basic goal is to be able to run reports from with in Quicken that show all expenses incurred.  Stuff like utilities, taxes, mortgage insurance is all paid out the business checking.  But if I need to order some new light fixtures on Amazon or but a couple of fire extinguishers from the hardware store, I'm going to use a personal credit card or even cash.  I use an accountant not Turbo tax and he works off the reports I'd provide


My plan A was to do this all in SQL Server but that would mean I'd have to create a front end my wife can use or teach her T-SQL.  You can see why I thought Q H/B might be a better option.

NotACPA

Joe Hutchins said:

As long as you have a Business checking account,  why not occasionally transfer funds from your personal account into the Business account and simply pay all business related expenses out of your Business checking account?

Q Home, Business & Rental Property will probably handle what you need ... but, as I suggested above, be sure to assign appropriate Tax Lines to any categories that you use for the business.

Q can then, quite simply, produce the Business reports that you need for your accountant.

Rick Gumpertz

Use Categories to distinguish Business from Personal expenses.  Then customize your reports to select the appropriate categories for each.

Unknown

Rick Gumpertz said:

Use Categories to distinguish Business from Personal expenses.  Then customize your reports to select the appropriate categories for each.

One can certainly use any categories they like and customize reports to get the categories they are calling "business" and the ones they are calling "personal".  But the real point is to work with Quicken instead of against it.

There are already tax reports and other business reports (in H&B) that will do the separation provided you are using categories with the tax line set properly.