Best practice: Adding business expenses from Personal CC
RoBeCo
Member Posts: 7
Hi, when we started our business the bank we chose only provided us with a debit card that didn't work 9 out of 10 times due to heavy fraud protection (we had to call the bank to unlock the card) so we made many purchases for internet services via a personal credit card.
I have all the receipts saved as PDF for these charges. Imported all the charges made for the business on the personal CC into the Wave business account under it's own credit card account and removed the personal items.
But not completely sure on the next step.
Do I change all these business charges on the personal cc account to the "Owner Investment / Drawings" Equity account and make the charges deposits. Add journal transactions for all transactions and balance them out from the "Owner Investment / Drawings" account. Upload the PDFs and merge these with the journal transactions?
We're fine with not paying back the specific charges itemized, as the LLC is owned by us (married couple), we take a monthly Owners Draw.
Comments
@RoBeCo,
Personally I would have kept the personal charges and just categorize them as an owners draw. The payments made on the credit card (shown as deposits on transaction page) would be categorized as owners equity. By doing so you are giving yourself credit for the expenses paid outside the business. The problem you are going to run into is that if you are paying the bill in its entirety, you are giving yourself too much credit. Reason being is that the charges are less than the payments. In the future I would strongly recommend just having a credit card dedicated to business only. In addition, FYI the IRS treats all charges on a credit card statement as a receipt. Further documentation is required for certain expenses like meals and entertainment.
The bill of the CC is not paid from the business bank account but from a personal bank account.
We just want to have the purchases properly recorded in the system. Every transaction has its own receipt we have stored as PDFs on our cloud storage.
Whats unclear to me is how do I link the credit card transactions to the actual purchase with the receipts. How do I balance these two. When the transaction is added as owners investment how do I balance this with the receipt of this transaction. We can't add it to the main checking account.
@RoBeCo,
If you are storing receipts via cloud storage then there is nothing further to do on your part. Only if you are using Wave's receipt function would you merge receipts and charges. Personally, I find that to be two much work. Easier to snap a pic of the receipt and upload to the cloud.
As I mentioned, the payment on the credit card would be categorized as owner investment since the payment came from your personal account. I was merely point out that you could have a situation where you payments are more than the charges uploaded to Wave. So for example, let's say you have a credit card bill of 2500. You paid the entire balance due. In the 2500 of charges were 500 of personal items (not in Wave anymore) and 2000 in business expenses. You can see the disconnect. You are giving yourself credit for 2500 payment (imported) but only have 2000 in expenses that were paid for outside the business.