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tylerparker1978
Level 1

When i pay myself a wage each month, is it an expense or a transfer, am i a payee?

I have a sole proprietorship with no employees, its a one man show.
Every month i transfer myself a personal wage from my Business checking account to my Personal checking account.
when i sync quickbooks with my online business banking accounts...
What should i categorize this banking transaction in quickbooks online as ?
Is it an Expense, or a Transfer ?
If it is an expense do i set myself up as a Payee ? 
and what should the category expense name be ?
so that it all reconciles correctly....

Thanks, Tyler
6 Comments 6
qbteachmt
Level 15

When i pay myself a wage each month, is it an expense or a transfer, am i a payee?

"i can choose Expense, Check, or Transfer for any given transaction"

Think of this as "Payment Method" as in, did you Write a check and need to enter a check #? Did you Transfer using online banking?

If you took a check, that is Check. If you logged into the web and sent electronic payment from your business bank to personal, that is Transfer.

".... and then i can link it to my Chart of Account types"

Think of this as the "why this money moved." Expense = printer paper or supplies. What you are asking is not an Expense activity, even though it is Cash Flow (out). You did not Purchase something with these finds, so there is no Expense.

"there is currently a "Retained Earnings" Equity account listed in my Chart of Accounts...."

You can put it here, or create an equity account and name it Draws.

"so if i understand you correctly... i should select my personal wage transactions"

Let's stop using the word Wage. You are the Owner, now, and not an employee. You don't get a Wage. You take funds from your business, because you deem the business has enough money that you can take what you have the Right to take, when you want to take it.

"as first a "Transfer" into "Retained Earnings" Equity account... is this correct ?"

I recommend this be tracked as Draw. At the end of the year, you will then see how much you have taken that year. On the first date of the new year, you can "zero" Draw to RE, to start fresh for new year for Draws.

tylerparker1978
Level 1

When i pay myself a wage each month, is it an expense or a transfer, am i a payee?

Thanks for your patience... and precision ...

so it is clear to me that my transaction is definitely a "Transfer" great !

now just to clarify, which tracking category is best suited :

a "Transfer" into an "Equity" account which i will name "Owners Draws" ?

OR

a "Transfer" into a "Long-Term Liabilities" account which i will name "Owners Draws" ?

Which is better suited to my needs, tracking it as "Equity" or "Long-Term Liability" ?

i am not clear on the difference....

Thanks, Tyler
ben16
Level 1

When i pay myself a wage each month, is it an expense or a transfer, am i a payee?

Its definitely not retained earnings.  Thats an end of year IRS term to show whats left over and transferring to next year.
Monique_C
Level 2

When i pay myself a wage each month, is it an expense or a transfer, am i a payee?

Equity, owner's draw.

Cryptogirl
Level 1

When i pay myself a wage each month, is it an expense or a transfer, am i a payee?

I operate out of just my personal checking for everything so should I be "categorizing" all my income as business and just gifts, child support as personal?

shortstackosu
Level 1

When i pay myself a wage each month, is it an expense or a transfer, am i a payee?

How do you report the draw for tax purposes or to show that you made some sort of income?

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