Bookkeeping: How Do I Split Personal and Business Expenses?

Question

I have an ADU next to my primary residence and often buy things for both units. I'm using Stessa and looking for the right way to record only the business expenses.

Here's what I'm doing:

1. Enter an inbound "owner contributions" transaction for the personal expense amount
2. Enter a transaction for the full invoice amount
3. Split the transaction- one goes into the appropriate spending category. The other goes to "owner contributions" in a negative amount- exactly negating the positive owner transfer in step 1

Am I doing this right? If not, what should I do instead?

Thanks,Jeff

Laura Newton · Answer

I think it would be a lot easier if you just set up a dedicated business bank account for your ADU deposit cash in the account and use this to pay for rental property expenses / make payments on the business credit card.

You can do it the way you are doing it right now, but it's really messy. I agree with @Mohammed Rahman you can check out Quickbooks and Digb as well. They both handle this better.

Jeff Lawlor · Answer

Thanks, Bruce. I do this whenever I can. Certain things just come bundled, though. Utilities for example.

"On the services/products that are used by both, just pay with the larger house account and have the smaller house write a check as a 'pay-back'."That's a good point- if I pay for it all out of my personal account, the LLC should be cutting me a check for the business expense portion. I've been skipping that step so far!

I suppose if I follow that practice, I would only have a single transaction in Stessa- my LLC cutting a check for the business expense portion of the invoice.

It appears I was asking the wrong question!

Bruce Woodruff · Answer

Yes, this is old school ,but easy and no other programs needed. Just make sure that the check/receipt from the LLC to the Personal Account is very clear, i.e., "$125.56 for 32% Utilities ADU Unit."

Bruce Woodruff · Answer

Get a separate debit card, credit card, and checking account and pay for each property out of it's specific account. On the services/products that are used by both, just pay with the larger house account and have the smaller house write a check as a 'pay-back'.

Jeff Lawlor · Answer

Thanks Laura. I do have an account for business expenses and use it as often as I can. This being an ADU attached to my home, there's no way to unbundle certain expenses like utilities.

I'm not married to Stessa. I do like that it offers both accounting and performance tracking. I want both features and don't want to enter my data in two software packages to get both. I'm very open to alternatives to Stessa that do both.

Jeff Lawlor · Answer

Thanks for the reply, Mohammed. I chose Stessa because it's specific to real estate investing. It does both accounting/bookkeeping and lets me track my portfolio's performance.

That said, would I be in the same boat with QuickBooks: I have one invoice that covers both business and personal expenses. Are you saying there's a way to split a transaction where the personal expenses go to a personal account rather than my LLC?

Mohammed Rahman · Answer

Hi @Jeff Lawlor - Quickbooks has a self-employed app that you can use for this. You link all your accounts and then you can categorize what falls under the business category and what doesn't.

Good luck!

Bookkeeping: How Do I Split Personal and Business Expenses?

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