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I'm new to QBO and I'm struggling what categories to use to pay myself a wage into my personal account so that it is recorded properly and not as an expense.
Thanks in advance.
Hi @Magdo1970
If you're not on the payroll (so you're working as a Sole Trader rather than a Limited Company) then you need to classify these payments as Drawings (usually entered as an Owner Equity account).
Essentially, you're making a drawing against the after-tax-profits of the business so there is no tax calculation per se. At the end of the year, the business profits are calculated & tax paid. The remainder is Owner Equity (equivalent to your take home / bottom line pay) & this is the pot from which you're taking the Drawings.
Just make sure there is enough in the pot every year to pay the tax.
Hope this helps.
Hi @Magdo1970 and @paul72 . I got the same question and after reading many posts on this I am confused.
What are the steps to transfer money to your own (or the owner's) bank account?
I have set up an Owner's Equity account. Do you really have to write a check to yourself?
Many thanks.
Hi @Walt V
You don't have to physically write a cheque to yourself but that's the easiest way to record it in QBO because a Cheque in QBO automatically registers against a Bank Account in QBO.
Choose the Drawings (Owner Equity) account as the Category on the Cheque & NOVAT in the dropdown.
In accounting terms, every transaction is (or can be thought of as) a Journal Entry.
It's just that QBO (& every other package) simplifies things by having special types of journal where one column/account is pre-populated. A Payment (whether that's to Owner or to pay a Bill) is a Journal (a transfer) between Bank Account & the posting account.
If you're using Bank Accounting Matching (I don't personally) you could skip the Write Cheque stage & simply categorise the payment against the Drawings (Owner Equity) Account - again with NoVAT in the dropdown. This will create the same journal in the background that the Write Cheque method does.
Hope this helps.
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