How to Categorize Personal Purchases on a Business Card
What to do when business and personal finances get mixed
We’ve all done it, you’re at the store, swipe the wrong card, and suddenly your business account is covering your groceries.
If you’ve accidentally made personal purchases on your business credit or debit card, it’s not the end of the world, but it’s important to clean it up properly in your books.
Here’s exactly how to handle those personal expenses in QuickBooks Online (QBO) or your bookkeeping system.
Why It Matters
Mixing personal and business funds can:
Complicate your financial reports
Mess up your Profit & Loss statement
Raise red flags in an IRS audit
Make it harder to understand your business’s true performance
Even if you're a sole proprietor, keeping your records clean is key.
How to Categorize Personal Purchases in QuickBooks Online
If you use QuickBooks Online, here’s how to fix a personal purchase that hit your business account:
Option 1: Use the “Owner’s Draw” or “Owner’s Equity” Category
If you're a sole proprietor, single-member LLC, or partnership, you can categorize personal purchases as:
Category: Owner’s Draw or Owner’s Equity
What it means: You’re taking money out of the business for personal use.
This keeps the expense off your P&L (it doesn’t count as a business expense) and tracks it correctly as a non-deductible withdrawal.
Option 2: Create a “Personal Expense” Account (If Needed)
If you want more detail in your records, create a dedicated “Personal Expenses (Non-Deductible)” account under the Equity section of your chart of accounts.
Important: Never categorize personal expenses as “Office Supplies” or “Meals & Entertainment” — that could falsely inflate your business expenses and trigger audit issues.
What About Reimbursing the Business?
If you accidentally charged a personal expense but paid the business back, record it like this:
Record the expense as an Owner’s Draw (or Personal Expense - Equity)
Record the repayment as an Owner’s Contribution (or Capital Investment)
This keeps everything clean and clear — and shows that the business didn’t actually lose that money long-term.
Tips to Avoid This in the Future
Use separate cards for business and personal purchases
Label your cards clearly (“Biz Debit” with a sticker works wonders!)
Use a receipt app like QuickBooks Receipt Snap to track purchases quickly
Do a weekly review of your bank feeds to catch errors early
Keep Your Books Audit-Proof
If you’re ever audited, the IRS wants to see a clear line between business and personal activity. Categorizing things correctly now can save you stress, penalties, or even a denied deduction later.
Need Help Cleaning It Up?
If you’ve got a year’s worth of mixed transactions or you’re not sure how to fix your categories in QuickBooks, I’m here to help.
I offer a free Bookkeeping Health Check to review your chart of accounts, clean up personal purchases, and make sure your books are tax-ready.
Contact us by click here
or send us an email at David@RuckandReconcile.com
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And as always, thanks for reading and we’ll see you next week!