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Year End Closing. Owner's Draw Negative. Looking for some support on this.

Hello there, 

I have been away for 6 months over seas and being that i didn't close my 2013 quickbooks year, i am here looking for some assistance with this. Hoping for some answers. 

All my stuff is in order, reconciled every end of month except for december as i just entered my depreciation amounts in according to my tax documents. i ran my profit and loss, balance sheet and trial balance reports and all is good. My year end balance matches my bank statement, so thats good. 

However, being that over the course of the year i had taken some money out for myself, my Owner's Draw account is -$2950. What can i do about this? Seems like its being carried over into the 2014 year. 

Also, my year end balance is $2684.36 and quickbooks did a automatic year end closing entry to my retained earnings in the amount of $3305.09. How come the amounts don't match? 

i thank you all trying to help out. Thanks 

Solved
Best answer 12-10-2018

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Established Community Backer ***

"However, being that over the course of the year i had ta...

"However, being that over the course of the year i had taken some money out for myself, my Owner's Draw account is -$2950. What can i do about this? Seems like its being carried over into the 2014 year. "


That is correct. Taking money means you removed an asset from the business data file = equity Out. There is nothing wrong with this.


"Also, my year end balance is $2684.36"

Balance of What? Checking? That means nothing.


"and quickbooks did a automatic year end closing entry to my retained earnings in the amount of $3305.09."

This is your Net Income. That value is "closed" so that income and expense restart at 0 for the new year.


"How come the amounts don't match? "


Run the P&L Standard for Last Fiscal Year. Run the Balance Sheet Standard "As Of" Last Fiscal Year. Both on your basis of Cash or Accrual; they have to be the same basis to relate.


Look at the Net Income at the bottom of the P&L; the sane Net Income line and the same value is on the bottom of the BS, as one of the Equity lines. This value added to your negative Draws is your Equity status for 2013; add to this the RE you see on the BS and this contributes to Total Equity. Look at Total Equity; having various separate accounts such as Draws is just for clarity. Total Equity does not change.


When the data file is for a Sole Proprietorship, it is not unusual to rename Retained Earnings to Owner Equity and just let QB take care of it. Your Draw account can have one entry dated 1/1/2014, for the amount it is negative, offset that to RE. That brings your Draw account to 0 for the new year. Total Equity is not changed by making this entry. The clarity of the separate account balances is changed.

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Highlighted
Established Community Backer ***

"However, being that over the course of the year i had ta...

"However, being that over the course of the year i had taken some money out for myself, my Owner's Draw account is -$2950. What can i do about this? Seems like its being carried over into the 2014 year. "


That is correct. Taking money means you removed an asset from the business data file = equity Out. There is nothing wrong with this.


"Also, my year end balance is $2684.36"

Balance of What? Checking? That means nothing.


"and quickbooks did a automatic year end closing entry to my retained earnings in the amount of $3305.09."

This is your Net Income. That value is "closed" so that income and expense restart at 0 for the new year.


"How come the amounts don't match? "


Run the P&L Standard for Last Fiscal Year. Run the Balance Sheet Standard "As Of" Last Fiscal Year. Both on your basis of Cash or Accrual; they have to be the same basis to relate.


Look at the Net Income at the bottom of the P&L; the sane Net Income line and the same value is on the bottom of the BS, as one of the Equity lines. This value added to your negative Draws is your Equity status for 2013; add to this the RE you see on the BS and this contributes to Total Equity. Look at Total Equity; having various separate accounts such as Draws is just for clarity. Total Equity does not change.


When the data file is for a Sole Proprietorship, it is not unusual to rename Retained Earnings to Owner Equity and just let QB take care of it. Your Draw account can have one entry dated 1/1/2014, for the amount it is negative, offset that to RE. That brings your Draw account to 0 for the new year. Total Equity is not changed by making this entry. The clarity of the separate account balances is changed.

Not applicable

this is an LLC. and yes, that was my year end checking ba...

this is an LLC. and yes, that was my year end checking balance. I now see where did the retained earnings entry came from.

as far as the owner's draw. I have it set like this:
Owner's Equity
   Owner's Contributions = $0
   Owner's Draw = -$2950
Can you please explain how to take care of this, i am nowhere near your experienced level with this and sometimes seems a bit confusing. I am guessing that this should be brought to a zero balance somehow so i can better track and see money taken out for my next year period.

Thanks in advance
Established Community Backer ***

" I am guessing that this should be brought to a zero bal...

" I am guessing that this should be brought to a zero balance somehow "


Open the Owner Draw account so you are seeing it as a Register. Make an entry dated 1/1/2014. Increase the balance by the total that is negative, to get to 0. For the "account" to offset this into, select Retained earnings. You might get a warning from QB that you are about to post to RE, and of course you are! This is only a warning, not an error, and it is what you intend to do.

Not applicable

ok , done. Worked out, but how come the retained earnings...

ok , done. Worked out, but how come the retained earnings balance is less that amount now?
Not applicable

never mind, i understand it now. since money taken out by...

never mind, i understand it now. since money taken out by me was reflected in retained earnings, total went down as my net income was not as much after money was taken out. got it.

I yank you very much. very helpful, once again.
Established Community Backer ***

I run a  P&L Detail, to look at all activity. I reconcile...

I run a  P&L Detail, to look at all activity. I reconcile balance sheet accounts such as bank, loans, etc. I address unpaid invoices. I review payroll and new assets.

It really depends on your business and tax entity and financial activities.

You can enter 2014 at any time.
Established Community Backer ***

"as my net income was not as much after money was taken o...

"as my net income was not as much after money was taken out."


You did NOT affect Net Income. You removed Asset (money).


Assets = Liability plus Equity.

Or, restated:

Equity = Assets minus Liabilities


You removed Asset. Taking the money is NOT an expense and does not change Net Income.


This was Your Equity, your ownership position in the business. You took it out.

Not applicable

yes, i understand, was a bit confused. Now, as far as cl...

yes, i understand, was a bit confused.

Now, as far as closing the 2013 year , is there anything else you would recommend to do or check prior to me starting to enter my 2014 up to date stuff in?

Thanks in advance

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