Reconciliation

[ntc_25]

Before I knew otherwise, there were a couple of expenses coming out of my business account in 2023 that should have been personal expenses. Once I found out I stopped the payments coming out of the business account, but what do I do about the transactions already posted before I knew? What is the best way to reconcile this?

[evelynm]

If you can go back into those transactions and classify them as owner withdrawals/distributions that would be best.   If not you can reduce the applicable expense amounts by the personal amounts so you do not erroneously take them as tax deductions.   If you put the funds back in be sure to offset as owner contributions and/or additional basis (depending on if you are a sole proprietor or partner/LLC member).

The personal expenses are non-deductible as business expense.