I run a small online store selling vintage kitchenware. Last week I bought three items at a flea market: a cast iron skillet for resale, a set of mixing bowls for resale, and a coffee mug for myself. The seller gave me one handwritten receipt for all three. I know the mug is personal, but it's on the same receipt as business inventory. How do I handle this so my bookkeeping stays clean? Should I just note the personal item on the receipt and only claim the business portion? I don't want to create a mess if I get audited.
receipts
One receipt, two personal purchases, and a business expense
One receipt with mixed items is common. The key is to annotate the receipt clearly. Write 'personal' next to the mug and circle the business items, then total only the business amount in your records. Keep the original receipt in your files even though it has a personal item on it.
Why not not just ask the seller for separate receipts next time? Way less headache.
I disagree with StaplerQueen. If the receipt has personal items on it, some accountants might say it's tainted. Safer to have the seller write a new receipt for just the business items, even if it's after the fact. But honestly, for small amounts, annotating is probably fine.
How do you track the cost of the mug? Do you deduct it as a personal expense somewheree? I'm new to this and confused about whether personal items on a business receipt need to be recorded at all.
northwind_nina, you don't record the personal item in your business books. Just ignore it for tax purposes. The receipt is proof of purchase for the business items. The mug is irrelevant to the business.
This is why I always pay separately. One transaction for business, one for personal. Even if it's the same seller. Saves all this second-guessing.
The IRS generally allows you to aolocate costs on a mixed-use receipt as long as you can substantiate the business portion. Annotating the receipt with the business items and their cost is standard. But if the receipt is handwritten and vague, you might want to create a memo that details the allocation. Keep it with the receipt.
bookkeeper_beth, does that memo need to be signed by the seller? Or is a personal note enough?
A personal note is usually enough for small purchases. The key is contemporaaneous documentation. If you write it at the time of purchase or soon after, it's stronger. Seller signature isn't required.
I'd just photo-copy the receipt and write on the copy. Keep the original untouched.
Thanks, everyone. I think I'll annotate the receipt, and keep a separate note about the mug. And next time I'll ask for two receipts. I appreciate the input.
So if I buy something personal with my business card, I just don't claim it? Or do I need to reimburse the business?