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Level 1

S-Corp Officer Compensation: How to enter owner equity and balance the books properly after member draws are taken

My business is taxed as an S-Corporation. I would like to have accurate P&L statements and be sure that all my transactions balance on reconciliation after entering member withdrawals.

 

I see there are categories for Owner's Equity and Owner's Withdrawals, both categorized as equity. There is also a "Compensation of officers" account under Payroll Expenses.

 

When I enter the money I've withdrawn from my bank account as an expense classified as compensation of officers, my reconciliation works out perfectly. However, my P&L seems to be thrown off.

 

How do I correctly enter owner withdrawals? Should they be entered in both equity and expenses?

Solved
Best answer February 23, 2021

Best Answers
jamespaul
QuickBooks Team

S-Corp Officer Compensation: How to enter owner equity and balance the books properly after member draws are taken

Hello, moving-forward.

 

I've got you covered. I'll ensure your owner withdrawals are correctly recorded in QuickBooks. 

 

When setting up an owner's draw, you'll want to set it up as an equity account instead of an expense.

 

Create a new account for the owner's draw and set it up as an Owner's Equity account. Inactivate the Compensation of Officers account if necessary. 

 

I take it that you've already entered the withdrawal as an Expense transaction. You'll want to delete it then process the draw as a check and enter it under the equity account.

 

To delete the expense transaction, simply open it, click the More menu then select Delete

 

deleteexp1.PNG

 

Next, process the draw through a check: 

 

  1. Click the + New button.
  2. Select Check.
  3. Choose the Bank Account where your money will be withdrawn.
  4. Under Category, select the Owner's Equity account, then enter the amount.
  5. Add other details of the check such as reference number, memo, etc..
  6. Once done, click Save and close

 

ownerequi1.PNG

 

A reference for the steps can be found here: Set up and pay an owner's draw

 

Also, an accountant will be able to shed some more ideas about recording this. If you need to know how these steps work on the accounting technicalities, I'd recommend consulting with one. 

 

This won't show up under your Profit and Loss report. Instead, you'll want to run the Balance Sheet

 

Need to run reports for the transactions or other records? Check out our guides from the Reports topic page

 

I'll help out again if you have more questions recording other transactions. I'm also open to address any other concerns you might have for QuickBooks Online. 

View solution in original post

2 Comments
jamespaul
QuickBooks Team

S-Corp Officer Compensation: How to enter owner equity and balance the books properly after member draws are taken

Hello, moving-forward.

 

I've got you covered. I'll ensure your owner withdrawals are correctly recorded in QuickBooks. 

 

When setting up an owner's draw, you'll want to set it up as an equity account instead of an expense.

 

Create a new account for the owner's draw and set it up as an Owner's Equity account. Inactivate the Compensation of Officers account if necessary. 

 

I take it that you've already entered the withdrawal as an Expense transaction. You'll want to delete it then process the draw as a check and enter it under the equity account.

 

To delete the expense transaction, simply open it, click the More menu then select Delete

 

deleteexp1.PNG

 

Next, process the draw through a check: 

 

  1. Click the + New button.
  2. Select Check.
  3. Choose the Bank Account where your money will be withdrawn.
  4. Under Category, select the Owner's Equity account, then enter the amount.
  5. Add other details of the check such as reference number, memo, etc..
  6. Once done, click Save and close

 

ownerequi1.PNG

 

A reference for the steps can be found here: Set up and pay an owner's draw

 

Also, an accountant will be able to shed some more ideas about recording this. If you need to know how these steps work on the accounting technicalities, I'd recommend consulting with one. 

 

This won't show up under your Profit and Loss report. Instead, you'll want to run the Balance Sheet

 

Need to run reports for the transactions or other records? Check out our guides from the Reports topic page

 

I'll help out again if you have more questions recording other transactions. I'm also open to address any other concerns you might have for QuickBooks Online. 

View solution in original post

moving-forward
Level 1

S-Corp Officer Compensation: How to enter owner equity and balance the books properly after member draws are taken

jamespaul, thank you so much for your help!

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