[Question] Entering Transcations in QuickBooks

[kimbeckers]

Hi fellow VA's

I have a client that has not entered any transactions into their QuickBooks for the entire year, mainly because they have been paying all their bills for the business from their personal account. I have advised them that this is not a good idea and moving forward they will not do it this way.

However for the time being we need to enter all the transactions into QuickBooks so that we are sure we have captured all the expenses and then forward to their accountant in order to file the tax return for the year.

So my question is what is the most logical way to enter all the transactions?

There are the following types of transactions that need to be entered:

Receipts for which they paid by cash, or personal check
Receipts that are on a personal charge card
Receipts that are on a business credit card

All the transactions are from last year and already been paid.

Moving forward I would like to set up the credit card in QuickBooks and then enter the individual expense on the credit card, and pay the card from their business checking account.

My thoughts were to possibly enter journal entries for all the transactions and set against owners equity but I would love to hear others thoughts on this.

Also, I would love to hear your thoughts on how best to file the physical receipts for our records.

Thank you so much,
Kim

[KathyCrofoot.com]

Hi Kim,

Don't you just love it when clients bring you their stuff to fix? There is actually an easy way to do this, and the CPAs that I've worked with have endorsed it as ok. One actually called it a "Suspense" account.

First Set up the Business Credit card right away, and enter all the charges and reconcile as usual.

Second, set up an Owner's Cash "bank" account, and run all the charges paid from the personal funds, payments received that they deposited to their personal checking account, cash payments and purchases etc. in there. At the end of the year do one journal entry to clear the account using the Owner's Investment account.

This way all the expenses are recorded, all the income is recorded, and the amount would show up on the Equity side as Owner's Investment.

As for filing, I have a NeatReceipts scanner, and scan all the receipts in there, and return the paper copies to the client, along with a CD copy of all the receipts. Major categories like Office Furniture and Equipment, Utilities, Office Supplies, and whatever makes sense for you and the client.

Make it simple to follow and the client will love you, and keep it up.

[kimbeckers]

Thanks for your suggestions Kathy, Some great ideas :-)

[kimbeckers]

Hi Kathy,

Quick question, when I set up the business credit card, I will be able to reconcile properly because all the transactions will be captured but what about for the personal credit card?

Some of the charges are personal only so the credit card is a mixture of personal and business expenses, I cannot enter all the transactions which are not business but I am not sure how I would go about reconciling the personal account with some of the transactions missing? Should I subtotal each statement for the business expenses and use that number to reconcile the account? I feel like I am missing a step here?

Thanks so much,
Kim

[KathyCrofoot.com]

I have a client that is forever mixing up his credit and debit cards business and personal. What I do is enter ALL transactions from the business credit card statement, but the personal charges go into an "other expense" account called Non-deductible expesnes. Otherwise it would be nearly impossible to reconcile the credit card. The Non-deductible expense account would then be adjusted at the end of the year (or the month moving forward) against the Owner's Equity/Draw account.

Did that make sense? On the personal credit card, I would enter those transactions in the "Owner's Cash" bank account as discussed before.

[kimbeckers]

Hi Kathy,

Thanks again for your response.

Yes, I think it makes sense, I would have to enter all the transactions from the credit card whether they be business expenses or not. If they are not business expenses then I would expense to the "non deductible" expense account in QB's then each month I would be able to reconcile the credit card statement.

However, I am not sure what you mean by

"The Non-deductible expense account would then be adjusted at the end of the year (or the month moving forward) against the Owner's Equity/Draw account."

Thanks,
Kim

[KathyCrofoot.com]

To keep the Profit & Loss statement clear of any non-deductible/non-business expenses, I make a journal entry from the owner's equity account to the non-deductible account, because it is really an owner's draw against the business. Some client's CPA want it done at the end of the year, and some want it done monthly.

[kimbeckers]

Hi Kathy,

Okay, think it makes sense now. So I would just enter all the transactions, reconcile as usual and then make the journal entries at the end of the month. Will the credit statements show as not paid though? Since they are not cutting any checks from the business?

Thanks so much for your help, btw.
Kim

[KathyCrofoot.com]

If the client is paying their credit card statement from their personal account, you would make that payment from the "Owner's cash" account as well. Otherwise you'd have balance on the credit card account on the balance sheet. Once you get the client trained, you won't have this problem any more.

[kimbeckers]

So I am doing both things then, making a payment from "Owners Cash" account and making a journal entry to offset, is that correct?

thank you so much,
Kim