Most QuickBooks users do a wonderful job of recording day-to-day transactions in QuickBooks. However, when unusual situations happen, transactions are frequently recorded incorrectly. Here are some examples of unusual situations and how to record them properly:

Refund or rebate from a vendor
On occasion, you will get a refund or rebate from a vendor. It may be for product purchased, overpaid workers compensation insurance, or even utilities. These refunds should be posted to the same account that the original expense was posted to.

Large Purchase
When a large equipment, furniture or vehicle purchase is made, it needs to be recorded in a fixed asset account instead of in an expense account. Although account names will vary, simply choose the “fixed asset” account that best describes your purchase.

Paying personal bills
It is generally recommended to pay all personal bills out of your personal account, instead of through the business. If you require additional funds in order to pay these bills, I recommend that you instead transfer the needed funds (in $100 or $1000 increments) to your personal bank account and pay the bills from your personal account.

In the case that a personal bill was paid from the business, it needs to be posted to one of these accounts:
– Shareholder loan/Note Payable-Shareholder
– Owners Draw/Shareholder Distributions/Member Distributions

Transfer of money from the business to a personal account
When money is transferred from a business account into a personal account, it needs to be recorded appropriately.
– Shareholder loan/Note Payable-Shareholder
– Owners Draw/Shareholder Distributions/Member Distributions (for transfers out of company)

Transfer of money from a personal account into the business
When you invest money into the business, it is important that the accountant recognizes that you are putting in an additional investment. If it is improperly recorded, it might appear to be sales or a reduction of expenses.
– Shareholder loan/Note Payable-Shareholder (for a corporation)
– Owners Contributions/Member Contributions (for unincorporated entities)

New Loan
When a new loan is made, it needs to be set up on the books. If it is a loan with cash received, you can simply record the loan as you record the deposit. However, if the loan is used to make a purchase, then it should be entered as a journal entry. (Debit to Fixed Asset account, credit to New Loan account.)

After the loan is set up in QuickBooks, it is time to determine how to record the payments. Since payments typically include both principal and interest, each payment should record both of these transactions. This can be automatically done through the QuickBooks loan manager. Go to the “Banking” menu and choose “Loan Manager.”

Please keep in mind that your accounts will likely be named slightly differently than my examples. If you have questions about how to record a particular transaction, please contact your CPA.