fairly new to accounting - seeking pointers to deal with personal purchases and loans for company

alexr

I'm fairly new to accounting so please don't shoot from the hip! Long story short:

1. I started a small business recently;
2. I made several (lots) of personal purchases on my own credit card or own bank account (with invoices showing my name and not the company's) for the company, i.e. currently I own them but I want to them transferred to the company to become company assets;
3. I paid several of the company's invoices from my own bank account or own credit card (these invoices show the company's name);
4. I loaned money to the company by transferring money from my own bank account to the company's.
5. Other persons besides myself also did 3. and 4.

Although some of the above were truly unavoidable, I'm aware I could have simplified life for myself (and I'm happy to be chastised as such, as long I also receive some helpful pointers).

Can I use Wave to deal with the above scenarios and still keep auditors happy?

If yes, would a (very) kind soul out there provide some helpful pointers on how to do that in Wave? I'm a very technical person, but rather new to accounting.

Alex.

Mikeg

alexr,

1. Congratulations!
2. Owner transactions should be accounted for using the owner contribution/draw account instead of the cash account. So for example - you purchase using personal funds some office supplies. The entry would be debit office supplies credit owners contribution/draw. Transferring assets are going be dependent upon what they are i.e a vehicle would need to be titled in the business name as an example. (this can be costly) But whatever you are transferring you should create a document to list what is transferred to the business. If you purchased equipment personally then debit the asset and credit owners contribution.
3. Same entry type. Debit the expense credit owners contribution
4. Loaning cash - Debit cash and credit owner contribution
5. Is the business going to pay this? if so, the cash they loaned would have been a debit to cash and credit Loan - John Doe. If the cash never came in, meaning it purchased or funded expenses then there is your debit and credit Loan - John Doe (if the business is going to pay them back) If the business does not pay them back, meaning you will, then debit whatever it was used for and credit owners contribution.
   Mike G, CPA
   www.mgfinancial.net

alexr

Mike, many thanks!

1. Thanks!
2. Thanks for the answer! Virtually all purchases were for equipment (electronic, tools, materials). So, besides using Wave to account for the purchasing of goods, I need to create a separate document to, essentially, detail the transfer of title? Are there templates for this? I imagine an excel like table, signed and dated?
3. Thanks for the answer!
4. Thanks for the answer!
5. Thanks for the answer! Yes, the business would pay this. The individuals did both, i.e. purchase goods and paid invoices. Do I take it that I would again need a separate document to details the transfer of title for said goods, like in 2.?

The company is based in the UK, though it doesn't sound like that makes a difference for the above.

Great community so far

Mikeg

alexr,
I'm here in the US. Many items like tools and such don't have a registered titled owner. I was merely suggesting for purposes of documentation. You can just create a list and date it. Something like a memo to the file. Add business name and language like The following items have been transferred as property to be owned by the company. Start your list with values assigned. I'm not familiar with UK tax laws but the accounting should similar.
For 5. Yes, I would assume that documentation would be a good thing to do.
Best of luck
Mike G, CPA
www.mgfinancial.net

nltc

Mike G, your answer was helpful to me as I asked a very similar question on another thread. I had a clarification/question about your first answer to alexr. In item 3, you say "Loaning cash - Debit cash and credit owner contribution". What do you mean exactly - do I record it as two transaction and categorize them? For example, I contributed an amount of $3k from my personal account. Currently I have this item categorized as "Contribution from N***" which is an account I made under the category "Business Owner Contribution and Drawing". This seems to correspond to "credit owner distribution". What would "debit cash" mean?

Mikeg

nltc,
The debit cash is the equivalent of the deposit made into the business cash account. If the transactions are imported or banking is connected then the debit would be taken care of already. You would use the drop down and assign it to Contribution from N***.
Mike G, CPA

nltc

Ok, I see, that is indeed the case, the transactions are imported from the bank.

nltc

When you say "debit the asset and credit owners contribution", that would mean I make a new transaction and classify it as a deposit under "owners distribution". What about the "debit the asset" part? How should I be doing that?

nltc

Also, if I eventually want to recoup an investment (eg I bought some equipment for the company with personal money) - i.e pay myself back for it once the company has enough spare cash, how do I do and account for this?

Mikeg

nltc,
Maybe it would be helpful if some examples were provided.
You buy a computer 2,000 and office supplies 500 with your own funds for the business. Since the transaction never occurred through the any of the business cash accounts.
Debit - Equipment (asset) 2000
Debit -Office Supplies (expense) 500
Credit owner contribution or loan 2500
You have some extra cash in the account and want to pay yourself back 500
From the accounting/transaction page use the drop down box and classify it as an owner distribution or owner loan. Since the cash came out of the business account it should go through the transaction page. Locate the transaction for 500 and assign correct account.
Now let's say the business paid a personal expense of 35 for you. Since the amount came out of the business account, you would locate the transaction in accounting/transactions and assign the 35 to owner distribution or loan.
Wave comes with a default account of owner contribution/distribution and advances from owner. It's up to you how and if you want to use those accounts or you can create your own. One for Contributions and one for Distributions. They would both go under the equity section. A loan account would be set up under liabilities.
Hope that helps,
Mike G, CPA

alexr

Many thanks for the answers so far, Mike. The above example is clear enough. Taxation and VAT reclaim are another animal. Since the invoices were billed to me and not the company, the company cannot reclaim any VAT from the equipment purchase, i.e. there is no input VAT, but the value sans VAT should still be declared as part of the total value of acquisitions on the VAT return.

Am I correct in all the above? Not sure if this is UK specific.

In Wave, I guess I use a Zero Rated tax for the "Debit - Equipment (asset)" in your example above, so that Wave can include it in the total of acquisitions but not in the tax (VAT) repayment

Mikeg

@alexr,
Unfortunately, my VAT skill set is not there. You could try and reach out to Merlin who is based in the UK.
Merry Christmas!

CyrenaJo

I understand the Business side entries you explained above I'm still at a loss as to how to make the entries on the Personal side (I use Waves for all of my Business and Personal accounting).

For my situation - I purchased a piece of equipment from my personal checking and now want to transfer ownership to the business. How do I record the transaction on the Personal side?

I was thinking I'd open the transaction from my Bank register and categorize it as "Farm Purchase" (expense) then do a Journal entry debiting the "Farm Purchase" account and then credit something. That's where I've hit a wall. When I do it as a loan to the business, I simply credit the "Loan to Shareholder" (asset) account and then follow up with my journal entries on the Business side. Help!

NancyC

Hey @CyrenaJo , Julian posted an example in this comment (including screenshots) of how to record transactions in both the business and personal accounts! I recommend using his comment as a guide.

In your case, since you've made a business purchase on your personal account, you should look into switching the withdrawal/deposit (as Julian's example was recording a personal transaction made on a business account). I hope this helps!