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Capital Grey
Level 1

Why are Invoices Removing Money From my Owners Equity?

i Purchased inventory to resell, and as of January 1 2021 I've had to turn it into a business to be able to pay Tax, Therefor all my current inventory is owner's equity. It's all in my Quickbooks and it shows up with how much equity i have, But let's say I sell something which cost me $1, well when i make an invoice for that item it takes $1 out of my owner's equity. Why is this? The company still owes me that one Dollar, so just because i sold the item doesn't mean the company no longer owes me the dollar. How do i stop this From happening or should My Inventory just not be in Owners Equity at all? Also if Anyone could just double-check my Picture and make sure the Asset, COGS, And Income Account is Correct? Thank you.

2 Comments 2
BigRedConsulting
Community Champion

Why are Invoices Removing Money From my Owners Equity?

When you sell an inventory item, the inventory asset account is reduced.

If you've set it up to be your Equity account, then it will I think be increased since it is on the opposite side of the balance sheet.

 

I'd undo what you did and change all your inventory items to use the standard inventory asset account, update the data when prompted, and then make an entry directly in your equity account to create whatever balance adjustment is then needed.

Capital Grey
Level 1

Why are Invoices Removing Money From my Owners Equity?

When i Created the Company i got 3 Equity Accounts. Opening Balance Equity, Owners Draw and Owners Equity. do i need to make a new one? If they are all Equity Accounts wouldn't they Just act the Same?

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