 QuickBooks Online 2023 Home Office Expense Tracking Method Number 4 Track Business and Personal Using a Draws Account A Balance Sheet Account Get ready to earn the skills needed to boost your bank books on up with QuickBooks Online 2023 Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page we also include added resources such as excel practice problems pdf files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it here we are in our QuickBooks online test company file using the accountant view as opposed to the business view you can toggle between the two views by going to the cog up top and switching the view down below duplicating some tabs to put reports in like we do every time right clicking the tab up top to duplicate it and then we're going to right click the tab up top to once again duplicate again duplicate the duplication process back to the tab to the middle reports on the left hand side we want to open up the balance sheet report as it's thinking tab into the right go into the reports on the left hand side and this time let's open up that profit and loss report the p and l report let's close the hamburger up top let's change that range let's start off with 010125 to 123125 and run it and then i'm going to tab to the left and do the same range change close on the hamburger and we want to go from 010125 to 123125 and run it okay let's go back to the tab to the right we've been thinking about how to be recording our tax adjustments for the home office use or possibly breaking out the personal versus the business for those expenses related to the home office down below we've created multiple accounts that are going to be sub accounts of the home office which is useful because that allows us to group that information that might be needed to give to a tax preparer in say one area for example we've been using class tracking in prior presentations in a few different ways as we could see here if i turn on the class tracking by selecting the drop down up top and say i want to break this thing out by classes poor favore run it and so now we've got our classes up top and we broke this out business personal we even had a tax adjustment thing but what if we one don't have classes or two we want to basically keep our business books just on the business side and record any personal stuff as what it really should be recorded as which is in essence draws in other words if we're looking at this home office stuff for example and we're breaking out certain expenses like the utilities or property taxes or the mortgage interest or whatever between business and personal the business side should be the deductible side and the other side should be a draw should be on the balance sheet it shouldn't hit the income statement we can put it on the balance sheet as a draw and we can do that without any class tracking stuff and so that could be useful now there are kind of pros and cons to that method the pro is that we're keeping our books kind of on a a normal method in that way and our balance sheet will be more properly adjusted in that way what we would like to do normally is try to break out as much as possible between business and personal so that we can actually have the expenses running through the checking account that are simply business related so that we can properly allocate them and easily allocate them within the business and hopefully have another QuickBooks account if possible for our personal side because QuickBooks is great at at tracking your personal stuff as well but if money is taken out of the business uh usually we're going to record that as a draw it doesn't hit the income statement at all it's going to go on the balance sheet over here under the equity side as draws so what we would like to happen is people take money out as draws and then they spend the money on personal type of stuff paying their personal bills or or that kind of thing now obviously these expenses are difficult because we're going to be paying one bill that has a business and personal side to it so we might just say okay i'm going to say the business side i'll break out on my business books and the personal side i will just record as a draw which which is good because that's the personal side of it which would be on the balance sheet not impacting the income statement and then we would wind up with our business uh income without even needing class tracking and whatnot now the drawback of that is that if you break out your business portion of these bills as you record them say 30 business based on the calculation of your square footage compared to the total square footage of the home for the office versus the home then you're not going to have on the income statement that total amount over here which you do when you use the class tracking method because what you're going to have to give to the tax professional is the total amount so that they can then break it out with the little form that they use you know for taxes for the home office calculation to result in the ending number that we are going to get at so that means that you just have to be aware of that and you can give the information to the tax professional just make sure you say hey look this is only the the hour half or the business half of it and the other half i'm going to give to you by running a report for the vendor possibly a vendor report that shows you the total payments or maybe you can track them in the equity accounts on the the balance sheet so let's give it i'll see what this kind of looks like what this could look like so if i go back on over here and we're going to say all right let's do this again we're imagining things are running through our bank feeds but this time we're going to be breaking out the business versus personal imagining business is 30 percent bit personal is the 70 percent and we're just going to put the personal to the equity account and not be even dealing with this class tracking business at all until possibly the end when we want to do that adjusting entry type of thing again so i'm going to go up top and say let's go to the plus button and imagine just money going out expense type of forms you can make rules for this as well with the bank feeds but we'll just do it with an expense form here and do the same kind of things here where we have the gas company we're paying the gas again and we're going to say let's say this happened 010126 this time for 2026 and we've got the same breakout of business versus personal down below but instead of using the class tracking i'm just not even gonna well let's i won't even do the class track and let's delete we're not going to do the classes instead the personal side which is this amount i'm going to put into a draws account which is a balance sheet account so if i hit the drop down we could put it into draws i think they give us one in quick books but draws we might so there it is owner's draws however we might want to make a specific draws account just for the home office stuff so that we can track how much we paid for these particular items in the home office so you might want to if you're going to use this method you might want to break out your categories of the draws you kind of run reports and track it so i'm going to hit a duplicate again and let's take a look at our chart of accounts over here chart of the accounts accounting on the left hand side and let's look at our chart of the accounts and we have that draws account down there let's put some some sub accounts in there we could have done it basically as we go but let's just take a look at it this way so i've got my draws account it's an equity type of account down below and then within this draws category maybe i will then make the sub accounts for the for the home office information the utilities and and so on so let's let's actually do that as we go over here so i'm going to go back to the expense form and say this one was for utilities so i'm going to say utilities draws this time tab making a new account it's going to be an equity account that's the point it's not hitting the income statement at all not going to hit the income statement and so we're going to say it's a draws account but it's going to be a sub account of the draws the draws draws i can't draw myself i have no artistic capacity i used to be able to draw a ninja turtle concentrate concentrate michael angelo anyways so there it is so we're going to break that out all right and so i can say save it and close it let's check it out we didn't assign any classes that's cool because i'm not doing that this time okay quick books scrolling up thank you for the reminder though we told you to remind us and they reminded us now i'm getting mad at them for reminding us when i said we needed to be whatever let's go to 2026 and run this thing and so now we just have the amount here for the for the business side and the personal side is over here on our balance sheet it's balancing over here doing a balancing act on the balance sheet walking the type row so we have it down here under the equity hold on i need to change the range i don't see it 010126123126 now run it back on down let's check it out again so there we have it now we've got our draws and this is the personal part that went into the utilities so now at the end of the year if i run i gotta make sure i run this report just for the current year because these draws accounts don't close out to to the uh they don't close out to the other equity retained earnings so you want to make sure at the end of the year if you use this method you're gonna you're gonna say hey look this is the draws this is the personal side and this is the utilities for the business side so that you have the total amount that you're going to use to plug in the tax return so that you can then apply the 30 percent which should get you back to the 225 here the other thing that you can do is of course go to your expenses on the left hand side when you're doing your tax prepping at the end of the year and just make sure that you go into your vendors my vendor and then we go into these what was i doing the gas company and then we can run reports you know by vendor over over here so you can run those reports you can also get to those reports by going to the hamburgie reports on the left hand side and type in we want the vendor and i'm going to look at the transaction list by vendor transaction list by vendor and then we can change our date range up top we're going to say that we want a custom range from 010126 to 123126 and that should give us a list of our items here there's the there's the 750 this expense form doesn't mean it's just showing the expense side of things that's just the form that we use so you can see the full amount is being recorded so you can then say hey look this is the amount that we actually paid you know to these particular vendors so that they can have the full information instead of just the information on the income statement which just is showing the the business portion so if we did this for a couple of the other ones let's go back on over and say let's do a new and expense form and let's say we played the landlord landlord let's say we had rent this time the landlord needs to be paid so same kind of breakout we're doing the 30 percent business so we did our breakout same that we did before based on what we're imagining to be the square footage so we're just saying if it was 2000 times 0.3 is the business side the rest is personal and then we're just going to say all right instead of breaking this out with the classes over here we're just going to say that this second one is going to go to rent rent draws or draws rent it's going to go to an equity account and i'm going to say this is going to be an equity type of account and it's going to be owners equity or draws over here i'll just say equity i'm not too concerned with that subcategory the point is i want to make it a sub account over here of equity or draws draws boom okay so then i can save it and close it we could just put it directly into draws but if i make that separate account if i save it and close it and say okay i know i didn't put a class i'm not doing that anymore i gotta turn off the reminder it's just gonna keep reminding me but here we have so now we have this side this is just the the business side and then on the balance sheet if we run the balance sheet now we're tracking on the draws we have the draws meaning these are the amounts that were spent out of the business books that are actually personal in nature and then of course if you had like property taxes let's do that pay the tax person we're gonna say expense form we have to pay big gov big daddy government wants their 10 percent they don't care they don't care how you get it whatever so we're gonna say delete oh what happened there i don't want the classes gotta pay big daddy government so we're gonna say then then i'm gonna say the second half of this is gonna be property tax draws tab and once again equity type of account and this is gonna be equity and we'll put a sub account of draws boom and there it is so we'll save it and close it and i know i know okay i'm gonna turn off the class tracking keeps doing that stop reminding me so now we've got our breakout over here and then on the balance sheet side of things if we run it again we've got our draws and i've made these separate accounts for the draws that are related to the the home home now you might even make another sub account for draws for the home and make these sub accounts of that if you had other items which you probably would that would be pulling out of draws so in other words let me just show you real quick what that might look like if i made an account over here and i said well let's just make that parent account called that's how i'll do it nice and easy i'll just make this draws account let's make that edit let's just make that uh called home home office draws something like that and then save it and then if i go back on over here to the balance sheet then we can run it and then in your draws account down here we got everything in the home office draws and then you might have other draws that you can that would be just money that you took out of the business for other stuff you're doing like going on vacation or whatever whatever it is you do it's not my business but you might have other draws that you have in there but these are the draws related to the home office which you might need for taxes so that you can give your tax preparer the full amount so you'd want to give them the full amount and you're still able to kind of break out just the business portion more properly for your income statement reporting and that gives you a better kind of reporting kind of as you as you more accurate reporting as you go because you're kind of just including the business side of things which is not just good for taxes but but good for the accounting side now if you did have other adjustments like we did before with the auto expense or something like that you could still do the class tracking thing if there was a difference here between this number which there almost always is going to be and the schedule see that you're going to be preparing possibly for the mileage method or something like that and you could still turn on class tracking and have that adjusting entry column to give you that adjusting adjusting column so that you can be ready for an audit or make a worksheet within QuickBooks giving you the books number the adjustment for taxes and then the tax numbers which should tie into the bottom line of the schedule see