What is the best way to record home office rental/mortgage and few business expenses charged on my personal account? For sole proprietorship. Thanks

Hello @3110 ,

The recording of home office expenses claimed by a sole proprietor are strictly a tax activity, rather than an accounting activity, because you can only write off a percentage of all the allowable expenses.  However, being a sole proprietor myself, I understand why you would want to make your accounting records actually match the T2125 (Statement of Business Activities) on your personal tax return.

I keep an annual spreadsheet where I calculate the total expenses for each different category, i.e. Utilities, Home Insurance, Security costs, Mortgage Interest, etc.  I then calculate what percentage of these things I can claim on the T2125.  This can be done one of two ways:  1.  Divide the sq. ft. of your "home office" by the total sq. ft. of your home or 2. Divide the room you use for you "home office" (1) by the total number of rooms in your house.  Use the calculation that gives you the greater percentage, but make sure it is reasonably accurate as it can become an audit issue.

Enter all of this into the T2125 of your income tax return.  Whatever the allowable amounts are that you can claim, is what you would enter into your QBO file.  The bottom line of your P & L for that tax year should then match the bottom line of the T2125 form you are filing for tax.  I have created an Expense Account called 'Home Office Expenses'.  The YE entry into QBO would look like this:

CR      Owner's Capital (equity account type) (it is presumed that all of things you are claiming for Home

           office were pd for personally)

DR      Home Office Expenses

If you send me a private message, I would be willing to share my spreadsheet with you which you can then edit for your own use, if you think it would be helpful.

Good luck!