Home – New Forums Money matters Need some advice on tracking expenses

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  • #984600
    Osmond Mcleod
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    Hi all.

    I have finally got Xero set up for my accounts and invoicing and i have got a separate bank account for my business.

    Unfortunately before i got all this set up, i had some business expenses i needed to pay from my personal cash (around $2500) and i am not sure how to account for these expenses in Xero.

    I would like to enter them somehow just so i have an idea of all my expenses and i am also hoping having the expenses accounted for in Xero will help with my tax next year.

    Any advice on how i should be entering these costs?

    #1148608
    Past-Member
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    I changed to Xero in July this year. I set up various accounts.
    Apart from the business ones, I set up personal accounts that I paid or transfer to, but I call them cash accounts and I don’t have feeds or anything on them because they are personal. I only have feeds on the business accounts. So far, it’s working well.

    So my suggestion would be to make an extra Petty Cash account, call it Development Cash or something that relates to you. Put the starting amount as the total $2500 (or whatever) you have spent. And then add your transactions. Hopefully that will make it nil at the end. And then you won’t need to use it anymore, but it will be there to refer to.
    Hope this makes sense.

    Cheers.

    #1148609
    Osmond Mcleod
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    Thanks Karen.

    And that will work ok for tax at the mend of the year?

    #1148610
    Past-Member
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    Regarding tax deductions, you need to speak to your accountant. All those records are pertinent. Print the reports out when you do your end of financial year tax. A good accountant is really worth having in business and the fees are tax deductible.

    All the best.

    #1148611
    Osmond Mcleod
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    I am not doubting that a good accounting is a good idea, my ability to pay said accountant is more the problem.

    :)

    #1148612
    Divert To Mobile
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    Hi Osmond,

    I think you classify the money you put into the business as owners equity, then record the payments as expenses. That will nill the ballance and the business owes you $2,500 which you will later take as drawings.

    Steve

    #1148613
    Aburto90
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    Steve is right, all of those purchases can just be recorded as owner’s capital (assuming you’re a sole trader,) try and avoid using the petty cash account. Unless you’re going to be able to keep track of every cent.

    I’ve spent a lot of time trying to weed out client’s petty cash accounts, it is way over used and if you can’t show receipts for what your cash withdrawals were for the ATO is going to consider it personal spendings by you and tax you appropriately.

    Make sure if you do use ‘petty cash’ there is lots of detail and you’ve got the documentation to back up that it was actual business use.
    Using the ‘Petty cash’ account with supplier as ‘petty cash’ and the description as ‘petty cash’ is asking for trouble.

    Just my two cents – please note this comment is based on previous experiences and an accountant or BAS agent who knows your specifics are going to give the best advice for your situation.

    #1148614
    Healthy Personal Finances
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    Yep – in Xero – you can enter the bill as per normal under the individual supplier name – and then you can go down to the bottom of the invoice screen and choose payment – and instead of choosing to pay from the normal bank account – chooser owners equity or owners drawings.
    Technically this is money the business owes you back as you paid for those things personally.

    However this will offset with any profit you make in the business that you take in the form of a distribution.

    Hope this helps. Love Xero :)
    Cheers
    Stacey

    #1148615
    BradFry
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    Agree with the above. Pop them in as Owners Equity and draw out the expenses to yourself.

    If you need any more help with Xero, please message me.

    Brad

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