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Need help with a QuickBooks entry

I have a client (Company A) who has an American Express (AmEx) credit card setup in their QB company file.

 

Since the beginning, when the Company A company file was created,  the owner has been making payments on the AmEx card using their Company A business checking account.

 

The owner of Company A recently opened another business (Company B).

 

In June the owner made the AmEx payment from the Company B bank account instead of from the Company A bank account because she didn’t have enough money in the Company A bank account.

 

Going forward the owner said the source of the AmEx payment will depend on the month, based on which account has the funds to pay so this scenario could happen again.

 

Since the AmEx account is set-up in Company A's QB company file how would I make the entries in Company A and B’s QB files when the payment comes from a company file that doesn’t have the AmEx card account in it?

 

Company A and Company B have separate checking accounts.   

 

The client uses QuickBooks Pro 2011.

 

NOTE: I know one solution is to  suggest when the owner knows she wants to pay the AmEx card with Company B's checking account she  writes a check to Company A for the payment amount, deposits the check in Company A and makes the payment from Comany A's checking account. Since this involves extra work for her she may not want to do this, soas an alterantive I'm looking to see if there is an easy way to make the entries in both company files.

74 Comments
Established Member

Re: Need help with a QuickBooks entry

Is Company A and Company B using the same checking account? If they are you probably you mihgt suggest to the business owner consider that they link accounts. Once the accounts are linked up the business owner could login with the same username and pw to see both A and B account files and make electronic transfers rather than handwritten checks. They could also make transfers easily from their smart phone app on the go as well. 

 

 

Member

Re: Need help with a QuickBooks entry

Thanks for the response Steve. Company A and Company B have separate checking accounts. 

Established Member

Re: Need help with a QuickBooks entry

I would highly recommend that they have two separate credit cards for the separate companies.  Just like it is imperative to keep business separate from personal expenses, company expenses should also be separated. Co-mingling funds between companies is almost sure to get messy and have to say that Company A should not be spending money they don't have. This is what I would tell my client anyway.

Established Member

Re: Need help with a QuickBooks entry

@ Richard

If the companies are both sole proprietorships or partnerships, the withdrawal of funds from company B would be an equity draw.  In company A show the influx as equity investment deposited to a cash account, and pay the bill from the cash account.

Established Member

Re: Need help with a QuickBooks entry

Sounds like a payment was already made directly from the other company's checking account vs. doing a transfer of cash between companies.  Again, I would suggest separate credit cards for each company here.

 

Wouldn't an "Equity Draw", as you call it, imply payment to Owner/Shareholder vs. another business entity?

So then does one company have partial ownership of the other company based on their "investment" in it?

 

 

 

Established Member

Re: Need help with a QuickBooks entry

 Sounds like a payment was already made directly from the other company's checking account vs. doing a transfer of cash between companies.  Again, I would suggest separate credit cards for each company here.

 

Wouldn't an "Equity Draw", as you call it, imply payment to Owner/Shareholder vs. another business entity?

So then does one company have partial ownership of the other company based on their "investment" in it?

 

Established Member

Re: Need help with a QuickBooks entry

I concur with @Teri with the easiest way to track all of this is keep separate credit cards for Company A and B so it can all get tracked in the right place.

Established Member

Re: Need help with a QuickBooks entry

I am answering original posting (OP) question.

 

"I know one solution is to suggest when the owner knows she wants to pay the AmEx card with Company B's checking account she writes a check to Company A for the payment amount, deposits the check in Company A and makes the payment from Company A's checking account."

 

I agree. This is indeed a perfect solution that will show an arm's length transactions between two companies.

 

"Since this involves extra work for her she may not want to do this, so as an alternative ... an easy way to make the entries in both company files."

 

If I were to do it I would just write a simple journal entry. Other ways to do it in QuickBooks as well.

   Company A: Debit AE account; Credit current liability account.
   Company B: Debit current assets account; Credit bank account.

 

(This example entry is when company B making payment (full or partial) directly to AmEx on Company A credit card. There is no actual cash transfer between Company A & B at this time. On company A's books, it will clear credit card balance but will show due to Company B as Other Current Liabilities type account. On Company B's books, it will show Due from Company A as Other Current Assets type account).

 

At some point, you will need to clear these intercompany balance sheet accounts.

 

There are other alternatives (already addressed here) but as you said: "she may not want to do it."

Established Member

Re: Need help with a QuickBooks entry

Questions on your suggestion that I copied below:

 

If I were to do it I would just write simple journal entries each month.
  Company A: Debit AE account; Credit current liability account.
  Company B: Debit current assets account; Credit bank account.

 

Co A:  Isn't AE account already a current liability account?  So what are you suggesting for the second one?

Co B:  We know Bank account is a current asset account.  So what are you suggesting for the second same?

 

Sometimes you jut have to explain to the biz owner what is required and they should respect your advice.