I understand that a profit and loss report does not show owners pay and personal expense. I don't understand how it is factored into the profit and loss report.

hollinjames · ‎March 23, 2021

I am very new to this. On the profit and loss report it shows total income of $190,000, expenses of $167,000, net income of $21,000. Then on balance report it shows owners pay and personal expenses of $60,000. Is this saying the total income was $250k, expenses were $167k, owner was paid $60k, and there is $21k profit for the business?

john-pero · ‎March 23, 2021

No, it is saying total income $190k, total expenses $167k. It should then say net income $23000 somewhere you are missing $2k. Owner "pay" is not a company expense but is a drawdown of equity. So the owner REMOVED $60k from the available cash of $23k, thus certainly increasing company loan liabilities by $37k. But that happens and is normal and legal. Until you get to the level of a Subchapter S corporation with the working owner required to be an employee tge owner cannot be an employee of him or herself. All the company money belongs to the owner to do with as they please, including spending more on themselves than the company has available in ready cash from operations.

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john-pero · ‎March 23, 2021

No, it is saying total income $190k, total expenses $167k. It should then say net income $23000 somewhere you are missing $2k. Owner "pay" is not a company expense but is a drawdown of equity. So the owner REMOVED $60k from the available cash of $23k, thus certainly increasing company loan liabilities by $37k. But that happens and is normal and legal. Until you get to the level of a Subchapter S corporation with the working owner required to be an employee tge owner cannot be an employee of him or herself. All the company money belongs to the owner to do with as they please, including spending more on themselves than the company has available in ready cash from operations.

AbegailS_ · ‎March 23, 2021

Welcome to the Community, hollinjames.

Allow me to share some information about the Profit and Loss report.

Personal finances and business records should not be mixed up as it will mess up your reporting. You can learn how to properly record the owner's drawing which is your income and your personal purchases. I'll be providing you steps to guide you to set the records.

To create an Equity account:

Select the Gear icon at the top, and then select Chart of Accounts.
In the Chart of Accounts window, select New and from the Account Type drop-down, choose Equity.
From the Detail Type drop-down, choose Owner’s Equity.
NOTE: S Corporations use Owner’s equity to show the cumulative net income or loss of their business as of the beginning of the fiscal year.
Enter an opening balance then select Save and Close.

Here's how you can record a personal expense from a business account:

Select + New and then Select Check or Expense.
Select a Payee from the drop-down ▼ menu.
Select the Bank Account, Cash Account, or Credit Card you used to make the purchase.
In the Category details section, select the drop-down menu ▼ to select the tax category that fits your need.
Enter the Amount of the purchase.
Select Save and close or Save and new.

See this reference on how to customize reports in QuickBooks Online.

I can provide what else you can do about the Profit and Loss report. Just post your comment here. Thank you.

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I understand that a profit and loss report does not show owners pay and personal expense. I don't understand how it is factored into the profit and loss report.