Member Equity Accounts

@cembick23 

This leaves a negative -$2,000 in each members account.

What initial entry can I make that will increase the investment equity by the initial $2,000

so that when I do a debit to owners draw it just balances out?

Unfortunately, you can't until year-end.  QB books all current year profits to Net Income and you can't make any adjusting entries to that without using income or expense accounts which, obviously, you don't want to do.  At year-end, your net income will be closed out to Retained Earnings, at which point, you can allocate that to the equity accounts with an adjusting entry. 

So at the end of the year how do i know which accounts to offset and how do i do it?  If I never show an investment to owners equity to offset the draw, I am always going to be negative.

Been looking for a real good answer on this for almost 2 years

Thanks

@cembick23 

You didn't mention the business structure but it sounds like an LLC taxed as a partnership.  Let's use the example from your original post.  Your net income is $10,000, all of which will sit as net income on your P&L until year-end.  On 1-1-24, QB will automatically transfer the $10,000 from net income to members' equity.  At that time, you will have ($6,000) in partner draws.  To zero that out, debit members' equity and credit their respective equity accounts.  

Thank you.  The time frame I am working with we were an LLC Partnership, just trying to close the books as we are now an LLC taxed as an S Corp

I will try to make this short

We get paid every month through distributions.  The client pays us and we have our net profit to distribute after words.  The money gets deposited into the bank and at the end of the month we take a draw.  When we take the draw, we write a check and the owners equity draws account goes negative (understandably).

Now, unless there is someway to deposit or transfer that money into our equity investments account, it will always be negative.

I have noticed, that this has an adverse affect on the P&L.  I am trying to get to this equation:

Client deposit to bank 1234 = $6,000 bank 1234 has a balance of $6,000

Somehow I want to move that $6,000 to each of the owners investment account before we distribute

creating a credit balance (increase) in that account.  So now when I write a check against draw, it doesn't doe the following:

Check to partner A = $2,000 = partner A draw account goes negative $2,000 (should be $0)

Check to partner B = $2,000 = partner B draw account goes negative $2,000 (should be $0)

Check to partner C = $2,000 = partner C draw account goes negative $2,000 (should be $0)

I pray this is more clear

Thank you for your assistance

@cembick23 

I have noticed, that this has an adverse affect on the P&L.

How is this affecting your P&L?  Partner draws have no effect on your P&L.  The only accounts affected are your bank account(s) and the partner draw accounts, all of which are balance sheet accounts.  If this is impacting your P&L, something is not being recorded properly. 

Somehow I want to move that $6,000 to each of the owners investment account before we distribute

creating a credit balance (increase) in that account.

Again, you can't move the $6,000 to each partner's equity account prior to the draw if the distribution is taking place prior to the end of the fiscal year.  This is basic double-entry accounting.  If you credit (increase) their equity account, you would need to debit something else which in this case (because it would be happening during the fiscal year) would be net income.  Since you can't do that, you will have a negative equity entry until fiscal year-end, at which point you can move it with a journal entry.  Keep in mind that, at any point during the fiscal year, your balance sheet will have both partner equity and net income in the equity section and, if you're drawing 100% of the net income, the two will net to zero.  

So now when I write a check against draw, it doesn't doe the following:

Check to partner A = $2,000 = partner A draw account goes negative $2,000 (should be $0)

Check to partner B = $2,000 = partner B draw account goes negative $2,000 (should be $0)

Check to partner C = $2,000 = partner C draw account goes negative $2,000 (should be $0)

I pray this is more clear

Why do you say they should be $0?  Draws should be negative because a draw is a debit entry that reduces equity.  You will make adjusting entries at fiscal year-end to close (zero out) the draw accounts.