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You bought something for your boutique with your personal card. Maybe it was before you even had a business bank account set up. Maybe you just grabbed the wrong card at checkout. Either way, you’ve got a receipt sitting there and you’re not sure what to do with it from a bookkeeping standpoint. Recording business expenses paid with personal funds is something almost every boutique owner runs into, and the good news is those expenses absolutely still belong in your books. Getting them in there is simpler than you might think.

This Happens to Every Boutique Owner

This is one of the most common situations I see, especially with boutique owners who are newer to bookkeeping. A lot of you paid for your first round of inventory, your Shopify subscription, your business cards, even your LLC filing fee, all out of your own pocket before you ever opened a business checking account. And then you get into QuickBooks and realize none of that is in there.

Or maybe you’ve been in business a while and you just accidentally swiped the wrong card. [It happens. Even to bookkeepers.] Either way, there’s a straightforward process to get those expenses recorded correctly, and that’s what we’re walking through here.

One quick note before we jump in: the step by step process below is for those of you using bookkeeping software like QuickBooks. If you’re tracking everything on a spreadsheet, the concept is the same, you just add the expense manually, but the journal entry piece won’t apply to you.

How You Record Business Expenses Paid With Personal Funds Depends on Your Entity Type

How you handle this can look a little different depending on your business entity type. So before you do anything, it’s worth knowing which category you fall into.

Sole Proprietors and Single Member LLCs

If you’re a sole prop or single member LLC, this is pretty simple. Since the expense didn’t come out of your business bank account, it won’t show up in your bank feed automatically. That means you need to create a journal entry in QuickBooks. A journal entry is just a manual way to record a transaction when there’s no bank transaction to pull it from.

Here’s how it works. You’ll DEBIT the expense or inventory account, which is just the category the purchase belongs to. Office supplies, inventory, whatever represents whatever you actually bought. Then you’ll CREDIT an account called Owner’s Contribution (or sometimes called Owner's Investment). Owner’s Contribution is an EQUITY account that tells QuickBooks the owner personally funded this expense on behalf of the business. Once that journal entry is in, the expense shows up on your reports. It’s there for tax time.

Now, do you have to pay yourself back? No. A lot of sole props and single member LLCs just let it sit as an Owner’s Contribution and move on. But if you want to reimburse yourself, you absolutely can. Transfer the amount from your business account to your personal account, categorize that transfer under Owner’s Contributions in your bank feed, and add a memo note that says something like “reimbursing owner for [expense].” No special rules, no paperwork, no CPA conversation required.

S Corps and C Corps

If you’re operating as an S corp or C corp, the first question to ask yourself is whether you actually want to reimburse yourself, or if you just want to get the expense into your books.

If you just want to record it, the process is exactly the same as above. Create a journal entry to debit the expense or inventory account that represents what you bought, credit Owner’s Contributions. Done.

But if you want to reimburse yourself, there’s a little more to it. When you have a corporation, you’re considered an employee of that business, even if you’re the only person in it. The IRS has specific rules about how owner reimbursements need to be handled so that money doesn’t end up getting taxed as wages. There’s something called an Accountable Plan, which is a formal reimbursement policy your business needs to have in place before you start paying yourself back for business expenses paid with personal funds. Without it, the IRS could treat that reimbursement as taxable income. So if this is your situation, talk to your CPA before you do anything. Get the Accountable Plan set up first, and then let them guide you through the reimbursement process.

Don’t Let These Pile Up

Whatever your entity type, the one thing you do NOT want to do is let these expenses sit in a pile and deal with them later. Later turns into three months later, and then you’re sitting down to do your books with a stack of personal card receipts you have no memory of. Record them as they happen. It takes five extra minutes right then, and it is SO much easier than reconstructing everything at tax time.

If you’re already behind, set aside one dedicated catch-up session to go through everything at once. Then make it a habit going forward to record these right away.

The Bottom Line: How to Record Business Expenses Paid With Personal Funds

Paying for a business expense with your personal card doesn’t disqualify it. It just means one extra step to get it into your books. A journal entry in QuickBooks, debit the expense account, credit Owner’s Contributions, and that expense is on your reports and ready for tax time. Don’t skip it.

If you want step by step guidance on exactly how to do this inside QuickBooks, that’s exactly what the Bookkeeping Made Simple for Boutiques membership is for. I walk you through the whole thing, click by click, so there’s no guessing. Come join us at www.findingfreedomfinancial.com/membership.