QuickBooks is one of the best software applications for business owners, especially when it comes to drawing money out of the company.
Sole proprietors can withdraw money right out of their organization just like an owner who draws and utilizes the funds to deal with personal expenses that are not related to the specific business.
In order to keep the balance sheet and other crucial financial records precise, it is important to register the draw and ensure the proper accounts are credited and debited.
With the help of QuickBooks, this process becomes easy and straightforward and saves you from the trouble of going through multiple pages of financial documents.
Note: Quite often, business owners utilize their compensation draws instead of paying out salaries for their work which is personal and not related to business. Whenever a business owner draws some cash or receives funds for non-official reasons, it is termed as a draw. In accounting language, it is known as Drawings.
Why do you need to set up Owners Draw in QuickBooks Desktop
A drawing account of an owner is an equity account, where QuickBooks monitors the withdrawals of the asset of the organization to pay a particular owner.
Although the owner’s draw is usually derived from the owner’s equity account, the latter is made up of various funds, including the money spent on your business.
From the profit earned by the company, business owners can withdraw a share of it. Also, the owner can take out the funds they contributed.
Also, since the owner’s draw is not taxable, in terms if business revenue earned, it contributes to net savings. Only during an owner’s personal return, a draw is taxable.
How to set up Owners Draw in QuickBooks Desktop
Here are the steps to create an owner’s draw account:
Total Time: 5 minutes
Select List and then Chart of Accounts/ Ctrl + A on the keyboard.
Move the cursor down to the left and select Account and click New.
Select Equity and click Continue
Type in the account name and the required description.
Select Save and Close
Here are the steps to write a cheque from the draw account of an owner:
- Step 1: Open the banking Section and choose the Write Checks option
- Step 2: Move to the Pay to the order of area and choose the owner and type in the amount near to the USD$ sign.
- Step 3: Assign the amount in the check in the equity account set up to register the owner’s draw.
- Step 4: Select Save and Close
When it comes to tracking a withdrawal of company assets to pay an owner, QuickBooks is the best option. Although this procedure is easy if you think you lack proper knowledge of it.