and now we will learn more about paying business expenses from personal funds in this case we will
learn how to track costs by job what if you track expenses by jobs or by class in that
case you can't do the method or the procedure that we learned in the previous video when the
owner takes money from their personal funds and spend it for business in a case like this where
you track expenses by jobs or by class you have to do something called the QuickBooks workaround
workaround means that we have to use QuickBooks slightly differently than from how it was designed
in this case we have to make a capital investment account for the owner as a bank type of account
this is because only a bank type of account appears in the write checks window everybody
knows capital investment is equity we are simply adjusting how we use the software so that it will
work for us in our situation let me show you what I mean here's the file from the previous video
here's the chart of accounts that we're using for both the previous video in this video now in the
previous video I told you double-click on the owners capital account in the chart of accounts
and you get the register and you can record any event where the owner took money from his or her
personal funds and spent it for business and in the previous example we had holden spending
his personal funds whether it's credit card bank account or cash he's spending his personal funds
for the company's delivery expense you cannot use this method if you track costs by job or by class
and it's very obvious the reason why there is no field there is a column in the equity
register to put in for class or for job so you have to do the workaround and add the additional
investment account so now let's go ahead and add an account to the chart of accounts to be able
to record all of the transactions when Holden pays from his personal cash his personal bank
account a personal credit card account we click add new we choose bank type of account because
again we're working around the way the software behaves we click continue and type in Holden paid
from personal and after we save it close we now have an account to record all of the events when
Holden pays from his personal funds for business reasons and now let's do an example let's imagine
on April 17th Holden paid three hundred dollars from his personal funds for a company delivery
this delivery was for the specific customer Dana Carvey and we use the writer checks window and
select the Holden capital account that we just created as the pay from account at the top of
the window so let's go ahead and do that from the main well before we do that we'll take a look at
the trial balance you can see delivery expense is only five hundred after we pay this delivery
expense for that specific customer even though it came from Holden's personal funds delivery
expense will increase by what he pays because it's delivery for this business and delivery expense
will increase to eight hundred and the new account Holden paid from personal is going to show up here
for the first time as three hundred dollars from the main menu we click banking write a check now
we choose instead of choosing cash and bank to pay from account as Holden's paid from personal
just click ok when you get this message we put in $300 normally there would be a payee like UPS or
FedEx and if we go to the bottom left we can see that we can choose delivery expense remember the
service that the business received when Holden paid from personal was delivery expense but this
window gives us the ability to choose the specific customer or the specific job that this payment
was for now when we click Save and close you can see Holden's paid from personal shows up for the
first time as a $300 credit balance because it's appropriate to credit an equity account when an
owner invests from their personal funds and of course delivery expense increased to the amount
that we said it would $800 the most important point is this report here profit and loss by job
you can see the Dana Carvey job was assigned $300 for delivery expense and that's the way to assign
a personal payment for business to a particular company job now to all you naysayers out there
let's discuss the consequences of this particular method one consequence is that the new equity
equity account will show up in the asset section of your balance sheet well for people who only
need the trial balance and nothing else and they can look at these numbers and understand what's
going on it doesn't really matter that the 300 is listed towards the top rather than the bottom but
if you really need your balance sheet perfect what you can do is you can customize the reports or
export to excel you only report a balance sheet once every period whether it be month corner or
year so on a day-to-day basis it's better to do this method and simply take a couple of extra
steps at the end of the year to adjust the way your balance looks what about the only other
consequence well we already have a capital account for the owners investment and it's an equity type
of account so what do you do you can just make a journal entry at the end of the period from
Holdings paid from personal transferred over to hold its capital in his equity account you don't
have to do that if you like to keep separate to pay from personal for other types from other types
of investment like when he simply took money and put it in the company bank account but let's take
a look at what the journal entry would look like and let's do it at the end of April when we take
a look at the trial balance what we want to do is move this 300 paid from personal to Holden's
capital equity we're imagining it's the end of the quarter or the end of the fiscal period or
the end of the year and we want to take all the money that accumulated in this new account which
is telling us how much money he spent for business from his personal and put it where the accountants
say it belongs which is Holden's capital equity well to make a credit balance zero we would make
a debit to that account to make it zero and then credit Holden's capital equity and that will go up
to thirty thousand eight hundred dollars from the main menu I'm going to click company make journal
entry and again we're mint we're imagining it's the end of the fiscal period whether it's month
quarter or year and the account that we debit is Holden's paid from personal we wipe out the
three hundred dollar credit balance by debiting it and the balancing credit goes to the account
that it belongs in Holden's capital equity so we can simply make this adjustment at the end of each
fiscal period in order to be sure that the balance sheet looks exactly the way we need when we click
Save and close you can see Holden's paid from personal went down to zero because we transferred
that $300 into this one Holden's capital equity and became thirty thousand eight two dollars