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Equity Accounts

I am using Desktop Premier 2019

QB setup an Owners Draw & an Owners Equity account  when I created my company file.

I setup the 3 accounts  Equity, Equity Drawing, and Equity Investment per someone who has helped me greatly here. So my question is are the Owners draw/Equity Draw  & Owners Equity/Equity Investment accounts the same? And if so, should I delete one of the sets of Equity Accounts?

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Best answer 02-07-2019

Accepted Solutions
Moderator

Re: Equity Accounts

Hello the_tile_setters,

 

Yes, the Owners draw/Equity Draw  & Owners Equity/Equity Investment accounts are the same. 

 

Owner's Draws are withdrawals for personal use of the owner. They are directly deducted from the owner's capital and equity. While Equity Investments are money you put in the business.

 

Equity account is where you can see the draws and investments of the your business. More likely, this is how your Chart of Accounts looks like when you create these accounts:

  • Equity (parent account) 
  • Owners Draws (sub-account of owner equity)
  • Owners Investment (sub-account of owner equity)

I'd recommend reaching out to your accountant to see if you'll need to delete account or not. 

 

Let me know if you need anything else.

View solution in original post

4 Comments
Established Community Backer ***

Re: Equity Accounts

Equity accounts depend on the business type of entity.  

 

I am an S Corp so I have:

 

Retained Earnings - Money my business has earned 

Equity Investments - Personal funds put into business

Equity Distributions - Biz funds taken out for personal

 

Drawing accounts are most often for Sole proprietors. 

 

Moderator

Re: Equity Accounts

Hello the_tile_setters,

 

Yes, the Owners draw/Equity Draw  & Owners Equity/Equity Investment accounts are the same. 

 

Owner's Draws are withdrawals for personal use of the owner. They are directly deducted from the owner's capital and equity. While Equity Investments are money you put in the business.

 

Equity account is where you can see the draws and investments of the your business. More likely, this is how your Chart of Accounts looks like when you create these accounts:

  • Equity (parent account) 
  • Owners Draws (sub-account of owner equity)
  • Owners Investment (sub-account of owner equity)

I'd recommend reaching out to your accountant to see if you'll need to delete account or not. 

 

Let me know if you need anything else.

View solution in original post

Anonymous
Not applicable

Re: Equity Accounts

I've been searching high and low for this topic, so thank you!

I need help cleaning up my equity accounts. Starting this year, I have these equity accounts:

1. Opening Balance Equity

2. Owner's Contribution

3. Owner's Draw

4. Owner's Equity

 

My owners equity account has continued to grow over the years. Recently, I was told by an accountant to create an owners contribution account, which I did.

 

Hypothetically: I have an "owners draw," account at $500. Then I later deposit $1,000 into "owners contribution." And, my "owners equity" account has $2,000 in it. 

At the end of last year, before I changed CPA's, I was told to close owners draw into owners contribution instead of owner's equity.

 

My questions are these. Shouldn't I offset owners draw with owners equity and not bother with owners contribution? Is the "owners equity" account ever going to be zero?

Thanks! Susie

QuickBooks Team

Re: Equity Accounts

Thank you for joining the thread,  .

 

The goal is to zero out your Income and Expense accounts at the end of the fiscal year to start fresh. With this, your retained earnings (company assets minus the company liabilities) has been moved to this account at the end of each year as well as the owner’s original investment of the company.

 

This is why you keep seeing your owners’ equity account to continue growing each year. While your owner’s draw is where QuickBooks tracks the withdrawals of the company's assets to pay an owner.

 

It would be best to seek professional advice from an accountant or a tax expert to help you decide if you'll need to offset your owners' draw. 

 

Here's more information from this article: Set up and process an owner's draw account.

 

Let me know if there’s anything else that I can help with the account by leaving a comment below. Take care and have a wonderful day!

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