Phone, Laptop and Equipment Bought Personally: Reimbursing Yourself the Right Way

Why personal purchases need a clean path back

A lot of business costs start with your own card. You see a phone on sale. You grab a laptop because the old one died. You pick up a drill or a saw at the supply store on the way to a job. The card in your wallet is your personal card, so you pay for it there. The tool is for the business, but the money came out of your pocket.

The problem is what happens after. If the receipt goes in a drawer and the cost never gets into the books, the business does not see what it spent. The cost is real, but the books do not show it. At year end, your CPA asks what the business spent on tools, and the answer is a guess.

The fix is a clean path back. The cost gets recorded in the books as a business cost. The business pays you back for what you spent. The receipt gets tied to the transaction. When the month closes, the cost is in the right line and the payback is on the books.

We set the path up once in QuickBooks Online or Xero, and walk each purchase through it. The same steps run every time, so nothing sits in a drawer and nothing gets lost.

Here is what happens when the path is set up right.

When each cost has its own row, the books tell the story of what the business really spent.

How a reimbursement works in the books

A reimbursement is a payback. You spent your own money on something the business needed. The business owes you for it. The cost goes in the books as a business expense, and the business writes you a check or moves money out to pay you back.

The steps are simple. You give us the receipt. We record the cost in the right line, tied to the date you bought it. We record the payback to you as a reimbursement, not as your pay and not as an owner draw. When the month closes, the cost and the payback both show up in the books, and they match.

Here is how it looks in plain terms.

• **You buy it.** You use your own card at the store or online.
• - **You keep the receipt.** A photo, a paper copy or an email. The proof that you bought it.
• - **We record the cost.** The amount goes in the right line, tied to the date.
• - **We record the payback.** The business pays you back, and we record it as a reimbursement.
• - **We tie it together.** The receipt stays on file with the transaction.

The cost goes in the books the day you bought it, even if the payback happens later. That way the month the cost belongs to is the month it shows up.

Some owners wait to record the cost until they pay themselves back. That is the mistake. The cost belongs in the month you bought it, not the month you moved the money. We record it when it happened, so the books stay in the right month.

A payback can move a few ways. A check from the business to you. A transfer from the business account to your personal account. A card payment if the business has its own card now. We record whichever way it moved, so the books match the bank.

What counts as a business purchase

A business purchase is something the business needs to run. A phone for client calls. A laptop for the books and the emails. A drill for the job. A printer for the office. A monitor for the desk. When the business needs it and you bought it with your own money, it counts.

The line it goes in depends on what it is. A phone goes to phone or equipment. A laptop goes to computer or equipment. A tool goes to tools and supplies. Software goes to software and subscriptions. We put each cost in the line that fits, so the totals stay clear.

Here is what counts as a business purchase.

• **A phone or laptop bought for the work.** The business needs it, so the cost is a business cost.
• - **A tool bought for a job.** A drill, a saw or a meter. The job needs it.
• - **Software or an app for the business.** A monthly cost that goes in its own line.
• - **Office supplies and small gear.** A printer, a monitor or a desk lamp.
• - **Parts or materials picked up on the way.** When the supply run came out of your pocket.

The test is simple. If the business needed it and you paid for it, it belongs in the books. We sort it out so it does.

A cost that is part business and part personal gets a note. If you buy a phone and use it for work calls and family calls, the cost goes in the books and we add a note that the use is mixed. Your CPA decides the split. We keep the cost in the right line and the note on it, so the books stay clean either way.

The records to keep for each one

The receipt is the big one. Without the receipt, the cost is hard to prove. A photo of the receipt, an email from the online order or a paper copy all work. We tie the receipt to the transaction in the books, so the proof stays with the cost.

We keep a few things on file for each reimbursement.

• **The receipt.** The proof that you bought it and what you paid.
• - **The date.** The day you bought it, so the cost goes in the right month.
• - **The line it goes in.** Phone, computer, tools or supplies.
• - **The payback.** The date the business paid you back and how it moved.
• - **A note if it was part personal.** When the item is used for both.

Keep the receipts in one place. A photo the day you buy it is the easiest way. We tie them to the books as they come in, so nothing is missing at year end.

When a receipt is missing, we still record the cost if we can prove it happened. A bank or card statement that shows the charge is the next best thing. But a receipt is always better, so the habit of a photo the day you buy it saves the most trouble later.

Owner draws and reimbursements are not the same

This is the part that trips up a lot of owners. A reimbursement and an owner draw are not the same thing, and they go in different places in the books.

A reimbursement is a payback for a business cost you paid for with your own money. The business owed you for it. The cost goes in as a business expense, and the payback comes out as a reimbursement. The books show the cost and the payback, and they balance.

An owner draw is different. A draw is money you take out of the business for yourself, not for a cost. It is not a business expense. It comes out of your share of the business. It does not reduce the profit the way a cost does.

The mix up happens when a personal cost gets recorded as a reimbursement, or when a real reimbursement gets called a draw. Both make the books wrong. The business costs end up too high or too low, and your CPA has to sort it out at year end.

We keep them apart. A real business cost gets recorded as a cost and paid back as a reimbursement. Your own money that you take out gets recorded as a draw. The two never cross.

Here is the difference in plain terms.

When the two stay apart, the books stay clean and your CPA has good numbers to start from.

What your CPA decides, not us

We keep books and run payroll. We do not prepare taxes. We do not give tax advice. We do not tell you whether a phone or a laptop counts as equipment you claim this year or as something you spread out over time. Those are calls for your CPA or tax preparer.

What we do is keep the records clean so your CPA has good numbers to start from. The cost is in the right line. The receipt is tied to the transaction. The payback is recorded the right way. Your CPA can read the books and make the calls.

When the tax questions come up, we point you to your CPA. We answer their questions about the books, but we do not give the advice. You can read more about how we keep the books on our bookkeeping page, and about payroll on our payroll page.

A situation we clean up

The drawer full of receipts

A small business owner buys phones, laptops and tools for the work all year with a personal card. The receipts go in a desk drawer. Some get lost. Some are blurry photos that no one can read. At year end, the CPA asks what the business spent on equipment, and the owner does not know. The books show almost nothing in the equipment lines, because none of the costs were ever recorded. The paybacks came out as owner draws, so the costs never showed up as costs at all.

Here is how we handle it. We pull the receipts out of the drawer and sort them by date. We record each cost in the right line, tied to the day it was bought. We split the real reimbursements from the owner draws, so the costs show up as costs and the draws show up as draws. We tie each receipt to its transaction. We close each open month one at a time, from the oldest forward. Then the routine runs every month, so the next year end starts with the costs in the books and the receipts on file.

Common questions

How do I reimburse myself for something I bought with my own money for the business? Keep the receipt. Give it to us. We record the cost in the right line, tied to the date you bought it. Then the business pays you back, and we record the payback as a reimbursement. The cost and the payback both show up in the books.

Is a reimbursement the same as an owner draw? No. A reimbursement is a payback for a business cost you paid for. An owner draw is money you take out for yourself. They go in different places in the books. We keep them apart so the costs and the draws do not cross.

What records do I need to keep for each one? The receipt is the big one. A photo the day you buy it is the easiest way. We also keep the date, the line it goes in and the payback on file. Keep the receipts in one place and we tie them to the books as they come in.

Do you tell me what I can claim on my taxes? No. We do not prepare taxes or give tax advice. We keep the costs in the right lines and the paybacks clean, and your CPA makes the calls. You can reach us on our contact page if you want a team that keeps your reimbursements clean.