Due from/Due to – When should this be used?

A few accountants of the clients I work for have me using Due to/Due from liability accounts we created to keep track of expenses paid by the owner and then reimbursed. I have another accountant having me use Owner’s contributions for any personally paid business expenses. Is this decision based on whether they are reimbursing themselves for an expense they paid for?

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  1. 29 Answers

    Yes, your logic is correct.

    Due to/Due from are typically used when you want to maintain a payable/receivable relationship between the funds and transfer accounts.

    If you are using a Due to account for owners expense, it would make sense that you want to accrue the expenses in this account and pay the owner at a later time. If you are using the Equity account, most likely, this is when the owner is gaining equity by investing in the business, and will not be reimbursed for these expenses. For instance, the owner could be paying for smaller items, which you are expensing (so they get booked to Due to). On the other hand, the owner could be purchasing a larger ticket item (some sort of asset for the business), and here you book Owner’s Contribution (so long as the owner is not expecting to be directly paid back for this asset).

    On the Due from side, this would be an instance where the entity is paying from something on behalf of a related party. It’s a receivable that is separate from the operating business. The Due from account is used so you keep separate your standard Accounts Receivable balance.

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