Do you have a small business, or are you thinking of starting one? If so then you will most likely find this helpful. When you start a small business or even long after it is up and running you will likely experience situations where you are both putting money into the business and of course taking money out.
The question always comes up as to how to handle owner contributions and distributions in QuickBooks. As with making a cup of coffee, and I do love a good cup of coffee, everyone seems to have their own way of doing it and everyone seems to feel theirs is the best way! That is until they see MY way of doing it and then they see the light! Just kidding. The bottom line on these things is that as long as my balance sheet and my profit and loss are accurate, and as long as these financial statements are in good form then your solution is “right”.
Another question that comes up along these lines is what happens when a business owner pays for something on behalf of the business? How do we record that in QuickBooks? Again there are several ways and any one of them can be “right” as long as the same two principles mentioned above hold true – that the financial statements are accurate and in good form (presentable). Ask yourself, would you be comfortable submitting your Balance Sheet to a bank to get a loan in its current form? If not, call me (866) 945-8070, I can get you there and I am not even kidding about that!
As a QuickBooks Trainer I am face with finding a balance between accomplishing the important objective of making sure the financial statements are accurate and in good form balanced with giving the business owner or accounting/bookkeeping professional a way of accomplishing this that is easy to follow. The first way to handle expenses paid for personally by the owner (ie with cash) would be a journal entry. This is the efficient way, but a lot of people are really not comfortable with journal entries so in those cases I show you another way, and you’re in luck because this method is presented right here in this video.