The first step is gathering every statement from accounts that had mixed transactions. Pull bank statements, credit card statements, and any payment app records for the period you need to clean up. You need a complete picture before you can start sorting.

Go through each transaction line by line and mark it as business or personal. Business expenses are costs directly related to running your company. Personal expenses are everything else, including meals that weren’t with clients, personal subscriptions paid from a business card, or household bills paid from the business account. If you’re unsure about a transaction, err on the side of personal. The IRS takes a dim view of aggressive categorization.

Once you’ve categorized everything, the accounting treatment depends on how things were originally recorded. Personal expenses that were booked as business expenses need to be reclassified. In QuickBooks, this means moving them from expense categories to an owner draw or shareholder distribution account. The expense goes down, and equity goes down by the same amount. This reflects reality: the business paid for something personal, which is the same as taking money out of the company.

For expenses that were never recorded at all, you need to add them with the correct categorization. A business expense paid from a personal card gets recorded as an expense with the offset going to owner contribution or due from owner. You covered a business cost personally, so the company owes you.

The balance sheet tells the story of what happened. If personal expenses flowed through business accounts, your owner equity decreases. If business expenses were paid personally and never reimbursed, your owner contribution increases. Both are legitimate, but the books need to reflect the actual flow of money.

This process gets tedious fast, especially if the commingling went on for months or years. A year of mixed transactions across three accounts could mean reviewing a thousand or more individual charges. Many business owners start this project with good intentions and abandon it halfway through because the volume is overwhelming.

Financial records cleanup services exist specifically for this situation. A professional can work through the backlog systematically, apply consistent categorization rules, and deliver corrected financials that are actually reliable. The cost is usually worth it compared to the time you’d spend doing it yourself and the risk of doing it wrong.

Going forward, separate accounts eliminate this problem entirely. A dedicated business bank account and credit card mean every transaction on those accounts is business by default. Premium business accounting in Boca Raton starts with clean separation, and maintaining that separation is far easier than cleaning up a mess later.

If you’re preparing for tax filing, prioritize getting the current year clean first. Prior years matter for your books but may not need immediate correction unless you’re facing an audit or refinancing. Focus your energy where it has the most immediate impact, then work backward through older periods as time allows.