I have a new sole proprietor business that I started early 2024. It was a side gig originally so there was no need for accounting software or opening a business chequing account. That changed in September 2024. I now have a business bank account and am setting up QBO. Due to the business still being new, not having a business credit card and trying to build cash flow, I still have to use my personal bank account for a lot of business expenses.
I have both bank accounts linked and am ready to start categorizing transactions. I am aware of the ideal process to have everything separated and am working towards that but I still need to account for the transactions already made. I am also aware of how to use owner's draw and contributions, however I don't intend to reimburse myself for the expenses paid using personal funds.
My question is what is the best way to accurately handle this. Which leads to the following questions...
1. Do I record the transfers between accounts as owner's draw and contributions or just transfers?
2. Do I categorize the business expenses from personal accounts as normal and then just exclude the personal transactions?
3. Do I set up a dummy account (if so what name and type) to track the personal transactions and then make an adjusting entry at the end of each month to offset the balance for reconciliation. What would the opposite account be?
Thank you,
Amanda
