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Not applicable

Am I entering Owner's Draw correctly?

I'm a sole member LLC.

I've got an "Owner's Equity" equity account set up and any time I Take money from my pocket and spend it on the company, I log it in this account and categorize it properly for tracking purposes.  

When I want to take money from the company, I created an "Owner Draw" equity account.  Do I write myself a check and use the "Owner Draw" account?  I noticed that if I do that, the draw account goes into a negative balance.  I feel like I should not have created a draw account and instead, wrote a check against the "Owner's Equity" account.

Which is correct?


Thanks!

Solved
Best answer 12-10-2018

Accepted Solutions
Established Community Backer ***

Yes use your draw account, look at the sample company fil...

Yes use your draw account, look at the sample company files and see how these are setup.

22 Comments
Established Community Backer ***

Yes use your draw account, look at the sample company fil...

Yes use your draw account, look at the sample company files and see how these are setup.

Not applicable

so a negative balance is ok for the draw account?

so a negative balance is ok for the draw account?
Not applicable

Thanks!

Thanks!
Community Contributor **

So what if I want to put money back into the Owner Draw a...

So what if I want to put money back into the Owner Draw acct? We have a ranch and I'm using owner draw as my house acct.
Established Community Backer ***

The draw account is for tracking funds taken out, use a d...

The draw account is for tracking funds taken out, use a different equity account for tracking funds in. So your equity accounts could look like this.

Owners Equity
              Owners Investment
              Owners Draw

With the investment and draw account being sub accounts of owners equity.
Community Contributor **

Thank You!

Thank You!
Community Contributor **

QB's won't let me set up this way says Owner Equity canno...

QB's won't let me set up this way says Owner Equity cannot have sub accts
Established Community Backer ***

Something is not right. Either your account types are dif...

Something is not right. Either your account types are different or your owners equity account was originally something else and re-named.
Community Contributor **

Ok It let me sub it under opening balance Equity..I start...

Ok It let me sub it under opening balance Equity..I started my books over as of 2014..carried my ending balance over from 2013..thank you..after taxes i'll have my acct. look @ it..but thanks for reminding me I can't put monies back into owner draw.
Established Community Backer ***

I wouldn't make it a sub account of opening balance equit...

I wouldn't make it a sub account of opening balance equity. You need to look at the owners equity account and determine why you cannot make a sub account there. This may have originally been a QB assigned account that does not allow sub accounts and has been re-named. You may be able to look at the transactions in the account and determine what is what.
Community Contributor **

Ok, not sure, took them out of subs under OBE, but I'll h...

Ok, not sure, took them out of subs under OBE, but I'll have to find this out somehow. It's an automated Equity, won't let me do anything. Thanks tho..:)
Established Community Backer ***

I would confirm the type and review the entries in your o...

I would confirm the type and review the entries in your owners equity account. There is no reason why you can not have sub accounts. My guess is the retained earnings account has been re named.
Not applicable

Im having the same problem, Im trying to create an Equity...

Im having the same problem, Im trying to create an Equity account with the sub account types of "owners draw" and "owners contribution"  I cannot figure out what detail type to put it under because I cannot add new detail types and the only one offered that are similar are "partner Contribution" and parter dispursement" but I am not a partnership. I do not have employees, only subs that I 1099.  I only need to track money paid to myself.  I occasionally use my business card to buy groceries or something that is not business related so I want to be able to code that as owners draws along with actual checks I write to myself, so at the end of the year I can see how much money I took out of the business that is taxable.
Established Community Backer ***

QB sets a chart of accounts based on your initial entries...

QB sets a chart of accounts based on your initial entries when setting up the company file, you edit these names and descriptions to fit your needs.
Community Contributor **

Did you figure it out? I didn't rename my accounts

Did you figure it out? I didn't rename my accounts
Not applicable

It's best to start your own questions. You may me using a...

It's best to start your own questions. You may me using a different QB than the original poster. To the person using QB Online...just choose the partner detail types...This really has no bearing on anything.
Established Community Backer ***

Yes, the draw account will be negative, this is a record...

Yes, the draw account will be negative, this is a record of funds taken from the business.

Not applicable

Will this negative draw called "Owners Draw" as an equity...

Will this negative draw called "Owners Draw" as an equity account carry balances from year to year?  I currently see the amount I drew last year and this year to date.
Not applicable

The Draw acct should be zeroed out to Owners Capital (Sol...

The Draw acct should be zeroed out to Owners Capital (Sole Pro.) or Retained Earnings (Corp) at the end of each accounting period - a calendar or fiscal year - which ever one your business uses.
You would do this by Journal Entry
Debit - Owners Capital Acct (because draws reduce capital)  
&  Credit - Draw Acct (this will zero out the debit balance)
Hope this helps.
Not applicable

Re: Im having the same problem, Im trying to create an Equity...

I had the same problem - QB Pro not letting me add a sub account to my 320 Owner Equity Account .....

So I set up a totally separate account with sub-accounts under the Equity portion of my chart of accounts as follows:

310 / Owner Investments

     310-1 / Owner Contributions

     310-2 / Owner Draws

That way, my accountant can clearly know my intent with respect to my postings.

QuickBooks Team

Re: Im having the same problem, Im trying to create an Equity...

Hello there, @DnR75040.

 

I'm here to help provide some details about setting up Owners Equity sub-account in QuickBooks Desktop.

 

When you create a company, there are specific accounts that QuickBooks creates by default and other special accounts that you can't delete, merge, or set up a sub-account. These accounts are:

 

  • Undeposited Funds
  • Opening Balance Equity
  • Retained Earnings
  • Inventory/Stock Assets and Cost of Goods Sold/Cost of Sales
  • Reconcile/Reconciliation Discrepancies
  • Unapplied Cash Payment Income
  • (Sales tax agency name, such as GST/VAT) Payable

What you can do is create another separate Owners Equity account, and from there you can set up a sub-accounts. 

 

For additional reference, you may want to check this article to understand QuickBooks Chart of Accounts

 

Please know that you're always welcome to post if you have additional questions about setting up an account. I'll be around to help. Have a good one. 

Not applicable

Re: Im having the same problem, Im trying to create an Equity...

Yes - that's what I did! thanks

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