Creating Owners Draw Sub accounts - and how to close them out at the end of the year.

Taking_Prophets · ‎March 18, 2021

Greetings and thanks for any assistance.

Issue: In my chart of accounts I have created numerous Draw sub accounts in order to track spending more closely. Im trying to close out the Owners Draws to RE but im realizing that I might have to zero out every sub account listed. Is this correct or can I simply add a journal entry with the Total Draws?

Example:

3100 Owners Draw

-->>3110 Personal Expense (sub acct)

---------->>Automobile (sub acct)

-------------------->>Gas ...... $100 (sub acct)

-------------------->>Service..$200

Will I have to go line by line to zero these out... for example $100 on gas and $200 on service.. or could I do one journal entry of $300 and be done? Also.. any advice on how to streamline this?

Also.. FWIW.. im not an accountant..so please bear with me...

Thanks.

john-pero · ‎March 18, 2021

You would never close out Owner Draw to Retained Earningd. You would close out Draw and its companion Contributions on 1/1 to Owner Equity itself. You also close out RE to Owner Equity. Closing out the Draw on an annual basis is merely an exercise in tracking your annual equity movement between draw and contribution but at the end of the day you can still run reports on an annual basis so moving equity between equity accounts has no effect on your balance sheet

Taking_Prophets · ‎March 18, 2021

Thanks John for the reply.. my apologies for trying to take this slow.. im just trying to self-teach myself this, the learning curve is steep.

Follow on question based on your response....

Currently I have the following setup....

-----------------

Equity

-->> Owners Capital (renamed from retained earnings as im a sole prop..)

-->> Owners Equity

--------->> Owners Contribution

--------->> Owners Draw

-------------------

Based on your reply, if I understand, you close out Owners Draw and Owners Contribution on 1/1 to Owners Equity. Given the setup above would you still recommend that? In other words.. did I mess up my chart of accounts organization for the items above.. or does it need to be re-arranged? When I closed out the info provided on my first question.. it added everything into Owners Capital as of 1/1.

Again.. thank you very much for your time.

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Creating Owners Draw Sub accounts - and how to close them out at the end of the year.

Creating Owners Draw Sub accounts - and how to close them out at the end of the year.

Creating Owners Draw Sub accounts - and how to close them out at the end of the year.

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