How to record a personal expense paid with the business card

Why excluding it causes a problem

Exclude looks like the obvious choice, because the charge isn't a business cost. But the charge really did hit the card. Intuit's own guidance is that a personal expense is best added to QuickBooks rather than excluded, because otherwise the account in QuickBooks won't match the statement when you reconcile it.

Exclude is meant for things like duplicates in the bank feed. Excluded transactions aren't added to QuickBooks and don't download again, so the charge disappears from your books while it stays on the statement.

Why expensing it causes a problem

Recording it as an expense keeps the card reconciled, but your books now show a business cost that wasn't one. Profit looks lower than it was, and your CPA has to find the charge and ask about it. Personal spending sitting in expense accounts is one of the things worth clearing before your CPA sees the file.

How to record it in QuickBooks Online

1. Go to All apps, then Accounting, then Bank transactions, and pick the credit card account.
2. Find the personal charge in the list waiting to be added.
3. Set the category to your equity account for money the owner takes out. If you don't have one yet, ask your CPA what it should be, then create it once.
4. Add the transaction.

Use the same account every time. A personal charge handled the same way all year is easy for your CPA to read.

Which equity account should it be?

That depends on how the business is set up, which is why it's a question for your CPA. Intuit describes owner draws as the money sole proprietors and partners take out for themselves, with partner distributions and dividends as the partnership and corporation versions. Money the owner plans to pay back is a loan rather than a draw, and that's recorded differently.

You only need to ask once. After that, the choice is the same for every personal charge.

What if it's already been expensed?

Before year-end, look through the year's charges in the card account's register for anything personal sitting in an expense account. How you fix it depends on where it is:

• The month isn't reconciled yet. Open the transaction and change its category to the equity account.
• The month is already reconciled. Go carefully. Editing a reconciled transaction can throw off later reconciliations, so check with whoever keeps your books or your CPA first.
• The year has already been filed. Leave it for your CPA. Changing a closed year can make your books disagree with the return.

How to stop it happening

The simplest fix is keeping the business card out of everyday reach: a separate personal card for personal spending, and the business card kept for the business. When a mistake still happens, record it the same day while you remember what it was.

Common questions

Should I exclude a personal charge in QuickBooks Online?

No. Intuit recommends adding a personal expense rather than excluding it, because otherwise the account in QuickBooks won't match the statement when you reconcile.

Can I deduct a personal charge if it was on the business card?

The card it was paid with doesn't make it a business expense. Keep it off your expense accounts and ask your CPA if you're unsure about a specific charge.

What is Owner's draw in QuickBooks?

It's a common name for an equity account that tracks money the owner takes out of the business. Which equity account you should use depends on how your business is set up, so ask your CPA.

Do I have to pay the business back for a personal charge?

That's a question for your CPA. Money you plan to pay back is treated as a loan rather than a draw, so tell them which it is before choosing the account.

This guide is general information about bookkeeping, not tax or legal advice. Rules change, so check the details with your CPA before you act on them.