Record START-UP COSTS (spent in personal) for a new business: QuickBooks Online Tutorial Journal E

Did you have business start-up costs for a new business but not sure how to enter for bookkeeping purposes? You probably used personal expenses to pay, if you haven't yet opened a business bank account. Here's a tutorial on how to record this as a Journal Entry in QuickBooks Online. I talk about how to create the expense and equity "owner's draw" accounts in the Chart of Accounts, and then how to enter them in as a journal entry.
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[@FinePointsBookkeeping]

Thanks for watching! What questions do you have about getting started?

[@ritaromano649]

How do I record the taxes paid on the upfront costs so that I can include in my government tax filing?

[@PriestRiverRetreat]

When doing journal entries for start-up costs would you date the journal entry for the actual date the expense was made or would you use the date the business opened?

[@FinePointsBookkeeping]

@@PriestRiverRetreat Is it in the same tax year? I would usually date it for the expense was made.

[@winesap2]

If you are depreciating something, like office furniture, it should be set up as an asset account, not an expense account. The depreciation in value over a time period is the expense incurred. So you'd have a depreciation expense account. If you are making an account for something like office supplies, that don't depreciate and are considered a expense, you create an expense account. The expense account appears on the profit and loss statement and the asset appears on the balance sheet. On the balance sheet you can see the asset depreciate over time and you also see the accumulated depreciation.

[@loandrisrojas5495]

Yes. She said a couple things that are wrong but is understandable since she is bookkeeper not an accountant, but video was helpful overall

[@winesap2]

@@loandrisrojas5495 I agree. Her videos are very helpful. It was meant to be constructive criticism.

[@kathythornhill13]

I have a small cheat sheet I keep on my desk for reference. It shows me in T account form how to treat credits /debits. Assets if Increased, records as a debit. If it decreases it is recorded as a credit. It shows the action for Liabilities and Owner Equity, Expenses and Losses and for Revenue and Income as well. Google - T form rules for debit and credit and look under images. You will find the form that makes sense to you.

[@FinePointsBookkeeping]

Hi Kathy! This is a great idea. Thanks for sharing! Krista (FinePoints Admin)

[@nickyjean0101]

I have a question. What do you do as a bookkeeper if there is a medical emergency or a death in the family? How do you prepare for your business and your clients if you died or were in an accident suddenly? It's always a thought going through my head for when I start getting clients.

[@johnallen6341]

This is a great video Morgan. Thanks for providing this. One question though. How would you handle an entry that is imported automatically from a linked bank account? For instance when I fund the new business bank account with a certain dollar amount, quickbooks pulls that in automatically as a deposit. Should this be done as some sort of equity if I want to be able to take this out as an owner draw sometime later after the business is making money? Any suggestions/ideas would be greatly appreciated.

[@GilbertMendoza]

This was so helpful! Thank you! Liked, subscribed. Fantabulous.

[@woodencraftlover4829]

Great tutorial video, thank u for sharing

[@nhatroHuynhThaiSonBenTre]

Thank you. Thank for watching

[@lesliecodron5185]

Love your tutorials :)

[@contextmatters8243]

Question: If the item is depreciable, should it go into an asset account where depreciation expenses go against it over time?

[@ashok191129]

Thanks for information.

[@rafatalkhiamy9078]

furniture, desk, computer, ..etc are fixed assets then you deduct the depreciation from the Book value each month

[@FinePointsBookkeeping]

Thanks for sharing! Krista (FinePoints Admin)

[@paulmaher1705]

When I do this it shows in profil loss report but if if go to expenses in Quickbooks, the expense is not there

[@lakshmistories]

It was great tutorial vedio

[@DarleneNacional]

Thank you for this!

[@robertvacarusi440]

To make it easier using the Debit and Credit for double entry in the journal I am always thinking what happens with the money. If it's an expense, money are going out so Bank will be credited and expense account debited. Similarly with income, money are coming in so we debit Bank and to balance that we credit Income account.

[@ritaromano649]

Thank you for sharing this video. I am wondering how do I make sure the tax portion of the expense is allocated correctly. Thank you.

[@stephepp6842]

How do I account for prior year start up costs (before the business actually started)? I have $3000 in legal fees that was incurred in November the year before the company started in late January of the following year. Can I put them as start up costs in January in the books when we actually opened for business? I understand from a tax perspective we can deducted up to 5k of start up costs in the first year and you can't deduct start up costs until you actually start your business. So I think I need to make a journal entry for January 1 for this amount. Background- this amount was paid by a partner who paid from his own pocket. Would you back date in your books before January 1? That doesn't make sense to do that when the business wasn't actually opened until January 1.

[@jessicagalasso9349]

How can I attach a receipt/source document to this journal entry for proof?

[@karinatorres170]

So can we just add all start up expenses under one account? Or do we need to add specific accounts like the one you just made for the Furniture. Like the LLC fees, furniture, pos, goods to sell and such, would they all need to be categorize under their own account?

[@loganhoelle3931]

in these entries, do you need to include lines in the entry of the sales tax and shipping of the items you bought? if so what would the account type and detail type be for sales tax and shipping?

[@davidaguirre7028]

Quick question: I am just starting out my bookkeeping business and I understand the journal entry you just completed. I am practicing QuickBooks Online with my son-in-law's small construction business. He has been doing everything from his personal account but rather than tie his personal bank account to QBO would it make sense to do manual journal entries for his income and expenses? P.S. I took him to the bank to set up a business bank account. :P

[@FinePointsBookkeeping]

Yes, it may make sense to manually do the journal entries for the ones from his personal account, but so glad you have him setting up a business one. It will make things way easier for both of you :) -Gabe (FinePoints Admin)

[@andrews6254]

So does that make the $1000 computer a tax deduction? I am trying to add about $5000 worth of start up costs (he is a contractor) for a new client and he wants them tax-deductable. I think I will make them expenses bought on "loan" from the owner, and have the business pay the owner back and pay off that liability as he begins to make money.

[@jerryjenkins6071]

Would I also credit LLC filing fees and business license filing fees as owners equity? Would this be debited as an expense account also?

[@FinePointsBookkeeping]

Yes, it's a business expense. So, if you paid with your personal money you can make it equity (probably the case b/c you didn't have your bank account set up yet).

[@hollyzech8500]

What should someone do if they paid for a startup expense prior to the business forming? Should they backdate it to when it was paid or date is as the formation date?

[@FinePointsBookkeeping]

You can technically be a business owner as a sole proprietor without registering with the state (most states), so you can add it as a startup cost from the date you paid it. -Gabe (FinePoints Admin)

[@hollyzech8500]

@@FinePointsBookkeeping Ok sorry I should have specified! They are a partnership and only started the LLC mid-year.

[@sarahstephens7505]

So how do i learn all this and make it make sense? i joined your class but dont know much about journal entries

[@FinePointsBookkeeping]

Feel free to leave questions in the discussions tab of the course. Morgan helps students with more specific questions inside there. -Gabe (FinePoints Admin)

[@elizabeththomas6044]

Hi Morgan, quick question, why would the owners salary not be an expense? Or does the owner not have a set salary and takes out according to profit ?

[@FinePointsBookkeeping]

Hi! If the owner is paid as an employee (W2) then it's an expense, but if the owner takes draws it's equity (like me as a single member LLC). It depends on the business structure and how they are paid, so you may need check with an accountant/lawyer on your situation.

[@davidwebb3035]

Thanks for this Morgan! Question, why wouldn't you debit a Fixed Asset account instead of an expense account? Since a new laptop or monitor would be an asset in the business?

[@marvelouss719]

I would expense a computer monitor depending on the amount. I only capitalized computer monitors if they are over $2500 each.

[@pamswigadventure6341]

You should make anything that has a lifespan of > 12 months an asset. How it’s handled on the tax return is a different matter. It’s all dependent on the best tax scenario. The tax preparer can advise if journal adjustment need to be made.

[@jessicagalasso9349]

Morgan, do you still monitor the comments on your older videos? I don't see many replies here...... You don't explain much about the reimbursement part of this transaction, which is where I need some advice. I paid for a ton of training for my business through my personal account. I have followed along with you here and entered the expenses now, but how do I reimburse? Do I need to reimburse since my business is a sole proprietorship?

[@FinePointsBookkeeping]

Hi! You can reimburse yourself however it's easiest to get the money (write a check or transfer) and make sure you categorize it as an owner's draw (or however you want to call it, as long as it's an Equity account). You technically don't really need to reimburse yourself unless you want to--you can leave the cash in the business. :) Does that help?

[@adcruz0110]

I had to purchase a new computer to continue my QB Online training and to use it for when I have my LLC. Can I still record the computer as a business contribution once I have my LLC?

[@FinePointsBookkeeping]

Yep!

[@adcruz0110]

Great! Thank you 😊