Handling business expenses with a personal bank account

It’s a good idea to keep your business and personal finances separate, but every once in a while you might happen to make a business purchase with a personal bank account. If you need to account for a business expense that was paid from your personal bank account, or if your business and personal expenses share a single bank account, here's how to handle it.

To account for business expenses paid from a personal bank account:

  1. Upload the receipt for the expense to your Personal profile. Categorize it as you normally would, make the account your personal bank account, and click Verify. This will create an expense transaction in the Transactions page.
  2. Head over to the Transactions page and change the category of the created transaction to Owner Investment/Drawings
  3. Now, click on the Accounting tab in your business profile and add a journal transaction in the Journal Transactions page.
  4. Create a journal transaction with three lines. Debit the appropriate expense account for the amount of the purchase before tax. Debit the appropriate Sales Tax Receivable account by the amount of sales tax applied. Credit Owner Investment/Drawings by the total amount of the expense. 

Depending on where you do business, you may not have to record recoverable taxes on purchases. If this is the case for your business, then the journal transaction above can be simplified to a two-line journal transaction that debits the appropriate expense account by the total amount of the purchase, and credits Owner Investment/Drawings by the same amount. 

  1. Upload the receipt for the expense to your Personal profile. Categorize it as you normally would, make the account your personal bank account, and click Verify. This will create an expense transaction in the Transactions page.
  2. Head over to the Transactions page and change the category of the created transaction to Owner Investment/Drawings
  3. Now, open up the Transactions page in your business profile and add a journal transaction by clicking More at the top of the page.
  4. Create a journal transaction with three lines by clicking Add Debit above the Notes field. Debit the appropriate expense account for the amount of the purchase before tax. Debit the appropriate Sales Tax Receivable account by the amount of sales tax applied. Credit Owner Investment/Drawings by the total amount of the expense.

Depending on where you do business, you may not have to record recoverable taxes on purchases. If this is the case for your business, then the journal transaction above can be simplified to a two-line journal transaction that debits the appropriate expense account by the total amount of the purchase, and credits Owner Investment/Drawings by the same amount.

The expense is now accounted for accurately and reflected in your personal and business profiles.

If you use a single bank account for personal and business transactions:

For any expenses listed in your transactions that you consider personal expenses, click the grey arrow to the right of the transaction and select Move to Personal

  1. For any expenses listed in your transactions that you consider personal expenses, change the category of the transaction to Owner Investment/Drawings, leaving the account as is.
  2. Make note of the transaction amount and head over to your Personal profile. Add a journal transaction that debits the appropriate expense account and credits Owner Investment/Drawings

The expenses will now be reflected on your books as personal and will not contribute to your business expenses.

To make your bookkeeping and reconciliation as simple as possible, we recommend having a separate business bank account for your business transactions. This doesn’t have to be an account that your bank calls “business banking” or something similar, it just needs to give your business transactions their own home.