How to record personal expenses and owner draws in QBO
In QBO, personal expenses paid from the business account should not be recorded as business expenses. They are usually recorded to an equity account, such as Owner’s Draw, Owner Pay & Personal Expenses, or Partner Draw, depending on the entity type. Intuit’s guidance is to record personal expenses paid from a business bank/credit card account in QuickBooks, then reimburse the company if needed.
1. Set up the owner draw account
Go to:
Settings ⚙️ → Chart of accounts → New
Use something like:
Field : → Choose:
Account → Type Equity
Detail Type → Owner’s Equity, Owner’s Draw, or Partner Distributions
Name → Owner’s Draw or Owner Pay & Personal Expenses
QuickBooks has a specific help article for setting up and paying an owner’s draw, and it treats owner draws separately from regular business expenses.
2. Record money the owner takes out of the business
Example: owner transfers $1,000 from business checking to personal checking.
In the bank feed:
Banking/Transactions → Bank transactions → Categorize
Categorize the transaction as:
Field : → Entry:
Payee → Owner’s name
Category → Owner’s Draw
Amount → $1,000
This reduces the business bank account and reduces owner equity. It does not hit the Profit & Loss.
3. Record a personal expense paid with the business card/account
Example: the business debit card was used for a $200 personal grocery purchase.
Categorize it as:
Field: → Entry:
Payee → Store/vendor
Category → Owner’s Draw / Owner Pay & Personal Expenses
Amount → $200
Do not code it to Meals, Supplies, Office Expense, Auto, etc., unless it was truly a business expense.
4. If the owner reimburses the business
Example: owner pays the business back $200.
Record the deposit to the same owner draw equity account, not income.
Field: → Entry:
Bank account → Business checking
Received from → Owner
Category → Owner’s Draw
Amount → $200
This reverses or offsets the draw. Intuit’s reimbursement guidance similarly says to use the same owner investment/equity-type account when reimbursing personal/business fund mix-ups.
5. If the owner paid a business expense personally
This is the opposite situation.
Example: owner used a personal card to buy $300 of business supplies.
Record an Expense in QBO:
Field : → Entry:
Payment account → Owner Contribution / Owner Investment
Category → Office Supplies, Repairs, Meals, etc.
Amount → $300
This records the business expense and increases owner equity because the owner funded the business personally. Intuit allows recording business expenses paid with personal funds either as an expense or journal entry.
6. Common cleanup entry
If personal expenses were accidentally coded to business expense categories, reclass them to Owner’s Draw.
Example: $500 of personal purchases were incorrectly coded to Office Supplies.
Journal entry:
Account Debit Credit
Owner’s Draw $500
Office Supplies $500
That removes the amount from the Profit & Loss and moves it to equity.
Important note for corporations
For sole proprietors, partnerships, and many single-member LLCs, owner draw treatment is common. For an S corp or C corp, be more careful: owner payments may need to be recorded as payroll, shareholder distributions, loans, or reimbursements, not simply owner draws. QuickBooks’ own payroll guidance distinguishes an owner’s draw from salary.
The safest rule: personal spending from the business account goes to equity, not expense; business spending from personal funds goes to expense with an owner contribution/investment offset.
