Xero - beautiful accounting software

Xero Business Community

Xero Business Community

Hi everyone, Come on over to the new discussions in Xero Central. It’s a more intuitive way to connect and chat all things business with one another. Ask questions, dish out answers, and get involved.

You can still view topics in the Xero Business Community to see all the useful knowledge that’s been shared there; and you can restart conversations you feel have been of huge value to you on Xero Central.

If you have brilliant ideas for innovations, you can keep on adding feature requests in the Xero Business Community, and voting on existing requests. There’s more in store, as we come up with the best way to take on your thoughts and share developments
Community > Small Business >

How do I pay back/reconcile business account for purchase of personal goods?

Started by Freddy Rodriguez -   in Small Business

I'm the epitome of bad business finances management. I'm a sole proprietor and I use my business account even for things like buying groceries, clothes, etc. How do I categorize these in my business account? I also use my personal account at times for business purchases. So, I guess I would also need to know how to categorize a business expense from my personal account. Is Xero able to pull these two accounts together when I need a report?
Similar questions and discussions below :) Brittany, Community Manager

- How to record personal Sole Trader transactions in Ltd Company account?
- Using Xero to manage both Personal and Business transactions
- US - How do I record starting funds put into my business account from my personal account?
- NZ - How do I record starting funds put into my business account from my personal account?
- AU - How do I record starting funds put into my business account from my personal account?
- UK- How do I record starting funds put into my business account from my personal account?

Hi Freddy,
you are not alone. Here is how you can solve it in Xero.

1) Private Expenses paid from a Business Bank Account
Set up a Liability Account called "Drawings". I would tick all three options: "Show on Dashboard Watchlist", "Show in Expense Claims" and "Enable payments to this account".
Any time a personal expense comes through on your business account, book them as Drawings (as you are effectively drawing money out of the business by paying for your personal things). So you are not selecting an expense account, but the liability account.

2) Business Expenses paid from a Private Bank Account (or Credit Card).
a) You can either use the Expense Claims function and add your receipts for private purchases in there. When you have approved them, you just pay from your Drawings Account, which will reduce it's balance (as you are spending money on behalf of the business).
b) You can also enter an account payable for the supplier you paid and paid that off from your Drawings account.

All of these actions make sure that private expenses do not affect your business profits. Instead, they show up on your balance sheet as money owed to or by you.

Best regards

Jet Convert  

Hi Freddy I do the same as you. Is it possible to have more than one account to handle different aspects of drawings?

And on a similar front. How do I handle non business related income coming through my various bank accounts. (eg I sometimes receive revenue from outside my business which end up in various cheque or credit card accounts... the dangers of solo traders...)

Keith McKellar Stewart  

Depending on the size of your business I would keep it as simple as Alexander as posted above.

With regards to receiving income to a business account which is personal, you could code this on the bank feed as either capital introduced, or as drawings. It has the effect of not including these figures in your costs or income.

You could of course propose different codes for different aspects of drawings, but I would avoid this, having seen charts of accounts grow to a mammoth 4 pages in the past with all sorts of bits, (ie. car expenses, car petrol, car diesel, car tax Reg No: ).

If you genuinely need to separate your drawings (but why in a business account) then perhaps using tracking codes could help you.

Richard Adams  

For a sole trader in an active biz making profits, if you separate drawings (as a liab), (casual) capital advances and retained earnings (as equity a/cs) into separate accounts, over time they balances are just going to keep growing, until 10 years down the track you are going to have a liability and equity balances equal to ten years earnings which as well as being a bit nonsense is an unnecessary disclosure to anyone reading the accounts. Therefore, for that scenario, I recommend renaming the default retained earnings account "Proprietor Net Equity" and posting all business <> personal transactions there.

Matthew Blair  

As a new sole trader, I've used my personal account for some expenses. I've just made my first GST return claiming purchases on my personal and business account. Going forward I'll use the method Alexander suggests, but how do I show these historical purchases in Xero on the actual date..even though they were from my personal account..Am I making things too complex! I'm a real newbie and going round in circles!

Mike Watson  

Hi Mike,
enter the purchases as accounts payable with the original date. Then pay them off from your Drawings account. To be able to make the Drawings account show Drawings in the paid from dropdown, you need to edit it (from the chart of accounts) and choose "Enable Payments to this Account".
Hope the helps.

Jet Convert  

Thanks Alexander, slowly getting my head round accounting! I created a new drawings account but could or should I use the existing "Owner A drawings (980)" from the chart of accounts?

Mike Watson  

Hi Mike,
as you want to keep your chart of accounts as lean as possible, it makes sense to use the existing one. You can always rename it to something that suits you.

Jet Convert  

Thanks guy's this really helped me as well being new to the whole accounts system!!
cheers :)

Kim Boast  

Merged: Personal Expense Paid From Business Account

Hi All,

Help! I accidentally paid some personal bills with funds from my business account and not my personal account. I transferred the amount back to the business account from my personal bank account, but now I need to sort these transactions in Xero as they appear in the bank feed?

Should I attribute them to an account? Make them expense claims? Just delete them from the feed altogether?

Thanks for reading, any advice would be gratefully accepted.


Dear Paul.
In your chart of account you should have an account called - Loan shareholders (drawings). the name may vary but the idea is that this is an account you can use to clear those transactions to.
In the bank reconciliation window, just use the spend money and receive money related to each transactions and just categorise the expenses and money paid back to your "loan account". the balance of this account should then be nil.

Hope this help

Cecile Boulter  

Hi Cecile,

Thanks for your advice, I have an Owner Drawings account, which I will assign these transactions to. I think that should work, it should balance out since I have made a deposit for the same amount as mentioned. I have being doing similar for the personal credit card transactions I make to separate them from business CC transactions.

Thanks again for the tip, all the best!


Merged: Reconciling business transaction that includes personal spending


Can anyone help me with the following. There are 2 transactions on the bank account for petrol stations. In each of these transactions some petrol was bought (legitimate business expense) and also some sweets for the kids (not a legitimate business expense). The person then refunded the cost of the sweets for both of these transactions back to the business account. So now I need to reconcile the 3 transactions (2 petrol station, 1 bank transfer) against the 2 petrol station receipts that have been entered as bills.

Transaction 1 - petrol station: (£50) = (£40) petrol + (£10) sweets
Transaction 2 - petrol station: (£35) = (£30) petrol + (£5) sweets
Transaction 3 - bank transfer: £15 = £10 sweets + £5 sweets

If I try to split the bank transfer across the 2 petrol receipts it won't let me enter a positive number. Can anyone tell me how to properly reconcile this?


Julia Bell  

In your chart of accounts create a suspense account on the balance sheet and allow payments to it.

Split transaction 1 into $40 petrol and $10 to the suspense account (ie debit $10)
Split transaction 2 into $30 petrol and $5 to the suspense account (ie debit $5)
Reconcile transaction 3 to the suspense account (ie credit $15)

The suspense account will now net to zero.

Alternatively if you want to do it directly to the P&L petrol account and enter the positive number then go to the chart of accounts and select allow payments on that account. The suspense account method is probably more correct as it is correct at every point in time (important if the numbers were larger and the time between spending and reimbursement spanned a month/year end), but coding it all to the income statement also works.

Either way make sure you don't include any VAT/GST on the sweets amounts as otherwise it will show up when you do your next return.

Hope that helps

Thomas BODGER  

Thanks, Tom - that's perfect.

Julia Bell  

I am a sole-member LLC, am migrating all of my data from QuickBooks to Xero, and have this same situation. In QB, I used a Liability Account called, "Company Owes Me" to track expenses owed to me by the company and for personal expenses made on the business account.

I since have a negative number for this account as I counted all transfers from my business bank account to my personal bank account against this Liability Account, whether it was for a "payback" by the business or me withdrawing earnings to pay myself and my bills.

What is the proper way to handle this?

The default Xero chart of accounts has a "(300) Owners Contribution" and a "(310) Owners Draw" that are both Equity accounts. Should I be using these? What about a Liability Account for tracking "loans" between the company and myself?

Thanks so much.

David Fendley  

David - You will probably see accounts for some companies showing the "shareholder current account(s)" as equity account(s) and others showing them as liability account(s). For me it depends on the who the stakeholders in the company are and their association with each other. If two or more people have different stakes liability treatment is more appropriate.

That said though.. if you have a negative balance you need to talk to a professional as that usually has tax implications (ie. Fringe Benefit Tax in NZ).

Matthew Blair  


Thank you for your response. I certainly see the difference with regards to stakeholders and have contacted my accountant.

David Fendley  

David, if the company pays you a "salary", actually its a Draw, then these payments belong in an Equity account called Draw.

So Equity looks like this:

Equity (heading)
Equity - David
Equity - Draw
Equity - Net (calculated)

Other personal payments go into that liability account and at some point it should be zero.

Wayne Spivak  

Hi. I am confused here! In my husbands business 'drawings' is the money he takes out, i.e. his weekly wage. At the end of the year the accountant does the books and all drawings taken from the business is subject to provisional tax. I am starting my own business and all the set-up costs have been paid with our cash or mainly funded on the credit card. This business now owes my credit card quite a bit of money. I also have money introduced from my son, which I class as a loan in? When I make payments to repay the money I owe why do I use drawings, as I will be taxed on this as income? Also I have mainly used my personal credit card for business and there may be one or two things that were used for private stuff which will be repaid from my own personal bank account. Is there another option to use instead of 'drawings' as it really has nothing to do with the business and I don't want to get taxed on my own personal purchases? I hope this makes sense? Thanks

Christine Beach  

HI Christine. Most Accountants use "drawings" as a temporary holding place until the end of year earnings are calculated and the profit distributed. There are a number of factors that need to be considered, and it would take a lot to re prepare a full answer to your questions. It really does sound like you need some good accounting advice. I'd be happy to have a short chat on the phone (call me on 04-282-0306) - you can also browse our website (look under resources, blog) for some issues you address.

I'm an NZ Chartered Accountant, Xero Certified Advisor and Xero's 2012 Most Valuable Professional. Please contact me for qualified accounting and business support: www.business-express.co.nz

Peter McCarroll  

Hi Christine. Simple answer.. drawings are not taxable. If you operate a company you can't end the year with the drawings account in a big negative so you offset that with shareholder-employee salary(s) expense which is what becomes the taxable item for the individual. If you are a sole trader a specific drawings account is a bit meaningless as it's your net profit that's the taxable number. Feel free to give me a call or skype anytime.. www.microtax.co.nz

Matthew Blair  

Merged: Accidental payment for something personal - directors loan account?

Hi all!

I just mistakenly paid my personal accountant from my business account. How do I reconcile this expense now?

When I started the company a few months ago I put in £7500 for which I created a 'directors loan account'. If I now put this bill under 'directors loan account' when reconciling, is all well again? Meaning that the company owes me the £7500 minus the amount for that bill?

And does this create any problems for the VAT?

many thanks in advance!


Sipke Visser  

Hi Spike. Yes, you should code the payment to your Director's Loan account and not clam any VAT on it.

I'm an NZ Chartered Accountant, Xero Certified Advisor, add-on Developer and Xero's 2012 Most Valuable Professional. I support small businesses in NZ with professional accounting services and offer paid Xero support and implementation advice to clients all over the globe. Feel free to email me at peter at business-express.co.nz if you need a Xero MVP on your team! Visit my blog for various Xero articles.

Peter McCarroll  

Thanks Peter!

Sipke Visser  

HI Alexander and Matthew Blair,

In xero, the owner's drawings is set up as with a liability or an equity account, shouldn't it be an equity account? or is it set up as a liability a/c so one can spend and receive money straight from it or am I wrong ? Please clarify..

Ruby Martens  

Draw is a contra-equity account. It shows the reduction of owners equity from the business and is only found in Sole Proprietorship, Partnerships and LLC's for the most part.

Corporate entities would have liability accounts as loans to Officers, etc.

Wayne Spivak  

Hi Ruby, Need more info to understand your entity and circumstances for approriate accounting. Skype me.. "matthewblair"

Matthew Blair  

Merged: How do I pay back/reconcile business account for purchasing personal goods?

I made two transactions in December for personal goods and I've just paid back the business account today.
How do I best record these transactions?

Lisa Holland  

If you have a Drawings account, I would code both the spend and the receive money to that account. Make sure that you treat both as No GST.

Xero Certified Advisor, Canadian CPA & New Zealand CA and Xero's award winning Most Valuable Professional. I give implementation advice to clients all over the globe. Get a Xero MVP on your team! Visit my blog for various Xero articles.

Peter McCarroll  

Thank you Peter.

Lisa Holland  

When I look at my income statement report, I don't see my 'owners draw' listed anywhere. Is there a way for me to see my total owners draw (monthly and YTD) in a report?

Lisa Engles  

Hi Lisa,

In the default chart puts the "Owners Draw" account in the Equity Section. You can see it on the Balance Sheet report ("Equity" section).

Xero Certified Advisor, Canadian CPA & New Zealand CA and Xero's award winning Most Valuable Professional. I give implementation advice to clients all over the globe. Get a Xero MVP on your team! Visit my blog for various Xero articles.

You can book a live remote Xero support session with me or self-paced Xero training for a very reasonable price.

Peter McCarroll  

Merged: Small business

if I transfer funds from my personal account into business account what group should it be keyed in xero? and when vice versa (when I withdraw the funds I put in)

sumit kharbanda  

Hi Sumit,
You code the transfer into the business account as "Funds Introduced". And then when you withdraw the funds you would code the payment to "Owner Drawings".


Tracy Mawson  

thanks for your help tracy..

sumit kharbanda  

Hi All,

Got a quick question.

We just setup Xero after running without an accounting system for a few months in the early stages of the setup of the business. We had various expenses that we paid off personal credit cards. Now that a bank account has been setup everything is being put through there.

My question is; we have submitted all those expenses through the expense claim section, and we don't want to be paid back for these, instead listed as Equity - Owners Investment. I have approved the expense claim but what should I do from there to "convert" those expenses to show as just investment into the company?


Dan Smith  

Similar answer Dan, go to "Funds Introduced" or "Owners Capital" in the Chart of accounts and tick "enable payments". Then you should be able to pay these from the "Funds Introduced" account effectively showing then as your owners investment in the company.

Tracy Mawson  

Merged: Personal payments for a sole trader


I'm new to xero and struggling with one main thing. I am a sole trader, often I will buy business related items personally eg train tickets, networking events etc or use my personal credit card for slightly bigger purchases. I have the receipts for these but I am not sure where to put them on my xero account.

Originally I thought about an expense claim but as I am not wanting the money to be paid back to me I am not sure where to enter these expenses.

In the past I have used spreadsheets for my expenses and self-assessment and so added all of these expenses together as part of the business.

Hope this makes sense!

Thank you

Caroline Towers  

Hi there Caroline - can be a bit tricky to start out with, and our Community has a bigger discussion on that here. I'm going to merge this there so you can take a look at the comments, and to keep all feedback together.

If you do have any other questions do just give us a shout :)

Brittany H (Community Manager)  

I seem to have done a similar thing here as other people have mentioned in this thread. I paid for $16 worth of parking and thought I used my personal bank card, but accidentally used my business card.

In my bank reconciliation I have $16 out going for the parking and then I personally transferred $16 back into my business account to pay for it. I don't have a "Drawings" account but a "Shareholders Loan" is this the same thing or different? Or should I setup a new account liabilities account and call it drawings?

Andrew Warren  

It's a different thing, but still acceptable for those transactions. Go ahead and set up a Drawings account for future use, and make it an Equity account.
As a side note, check with your bank and see if they can personalize your cards. If they can, then have something business related put on your business card, and something personal such as family or pet pictures on your personal card. Makes it easier to tell them apart.

Nancy Wauchope  

Hi all,
I have a similar problem but in reverse: a customer has accidentally paid a sole trader invoice into my company bank account (which is linked to Xero). How to I correctly use Xero to record the transfer of this money out into my personal (non-Xero) account, so it is not assessed for my company's corporation tax bill, or as taxable income from the company (I will declare it separately as sole trader income)?
Many thanks!

Robert L  


Code BOTH the deposit and payment out to the same account - probably Suspense or Drawings or Shareholder Loan. This will bypass your P&L and by using the same account for both legs they will offset.

If you didn't pay it out again then code to Drawings, Owners Contribution or Shareholder Loan (whatever is setup for your org).

Canadian CPA & New Zealand CA and Xero's award winning "Most Valuable Professional." You can book a live remote Xero support session with me.

Peter McCarroll  

Thanks very much Peter - that's a great help.

Robert L