If my aunt has to go into a nursing home will we be made to account for these withdraws? If so, how would we go about accounting for them?

Yes. Quicken or Quick Books are good & easy programs for doing this.

So much of this will depend on how your aunts state manages Medicaid. In general, when your aunt applies for Medicaid, she will need to provide actual copies of her bank statements as well as summary statements on her SS and all other income, any funeral, burial policies,and all insurance (health & life) policies.
Some states require 3 months to accompany the initial application while others want 6 months or a years worth. Whatever the case, the state can look at 5 years of any and all financial documents - you sign off on allowing that by applying. The state or sometimes the NH admissions person will ask you for documentation on checks that seem out of place as they can trigger a transfer penalty that has to be met before auntie can be eligible for Medicaid.

For my mom's application, I had to provide a bank officer written letter from that detailed any and all accounts (savings, investment, safe deposit) closed for the past 3 years and how the proceeds were distributed (for example, CD # 1234 closed 1/12/07 proceeds deposited into acct # 6789). Fortunately based on my meetings with her attorney, we had condensed her bank accounts down to a single bank which made all this so much easier. If your auntie has different banks then I'd suggest moving it all to one bank and 1 single account that her SS and any retirement gets direct deposit into. Just easier to manage.

If you are doing ANY co-mingling of accounts, you really need to STOP that now.
By co-mingling that means you or your mom deposit any checks written out to either of you into your aunts account. It could have been that you were at the bank and got a check for $ 37.50 and just did it because it was easy to do......Don't.
Also no co-mingling of purchases. Yes, you'll walk out of Target with 3 different receipts but just do it from here on out.

If you're talking about a lot of $$, then you need to see an attorney to sort it out
and perhaps get a "personal services contract" done so pay you or your mom for
caregiving and estate management. Also update aunt's will and other legal too.

But if this is relatively small amounts, I would suggest that you keep every receipt and document it. Go though last years monthly bank statements and figure out what each withdrawal was for and record it and get Quicken or Quick Books and do this every month religiously. Buy Quick books from auntie's account too.

For the incontinent supplies, which are expensive, make sure the checks are made out to the business. Whenever possible make the checks out to a business name rather than to an individual.With my mom's application, we ran into a glitch for a check for 2K written to John Smith which was for auto repairs. I found the receipt from John Smith Mechanic & faxed it over to the caseworker and all was OK but this is the sort of thing that I experienced. With my MIL, she was writing regular $$ checks to her personal care assistant that the state was paying for....well what she was doing was buying her liquor and getting her cash and this was sticky to deal with as it was looking like a transfer penalty and then an issue for the caregiver's employment as this is NOT supposed to be done.

If you start this now you won't be overwhelmed and in a total panic when the day comes that auntie needs to go into a NH and you have a week to get it done.
Good luck.

I assume that Aunt will be applying for Medicaid, right? If not, if she is going be private-pay, then the nursing home won't care diddly how her funds were handled in the AL. Even in this scenario, take Igloo's advice to heart, in preparation for the time that Aunt's funds run out and she must go from private-pay to applying for Medicaid.

I would keep records and receipts. This way you will have proof of what happened to the money and that it was used for her. A better approach would be to have the money only in her name and then get a power of attorney that allows one of you to make withdrawals.

Aunts money is in a savings and checking account...all of her bills are paid by auto deduct and her SS and VA payments are direct deposit....the only money we (mom and I) withdraw is to give her spending money for groceries, haircuts and daily living expenses....she is 95 and suffers from dementia, so we don't like to leave too much cash in her hands......she tends to hide it and forget she has it..she has around $45,000 left...lets say she has to go into NH in a year and has $20,000 left and she private pays for 6 months....will she have a problem after that applying for assistance?