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Personal Car Purchase
The owner of the company purchased a car for his wife and the installment payments are coming out from the company's bank account and is being expensed as auto expenses. Since the car is not booked as a company asset I told him we cannot be making car payments from the company's account for an asset that belongs to him personally. Can anyone advise if this is correct because he does not agree with me.
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I agree with you. There are ways that it can be legitimate depending on the business. The substance of the transaction is either the business providing a loan, or, the owner making drawings from the business. Either way, it is wrong to put it through the accounts as a business expense seeing as it's not a business expense, and will lead to a lower taxable profit as well.
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