owner's equity


C

Chris

Just wondering if someone could tell me the right way to setup an
owner's equity and draw in Quickbooks for a canadian corporation.

I understand basically how it works but I am not sure of how to enter
cheques so that they go up against the owner's equity account and
update the profit loss automatically to reflect the decrease in profit
as a result of the draw if that is what is supposed to happen.

Any hints in the right direction would be very much appreciated.

thanks

Chris
 
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?

!-!

Draws do not affect profit. Write your cheques and charge them to the
Owner's Equity account, or to a separate Draws account (Equity) if you
prefer.
 
C

Chris

Thanks kindly for your reply

I just thought I was missing something since the Quickbooks help said
that it is based on the company profit so I thought I was doing
something wrong since it didn't appear on the P and L's

Thanks for your help

Cya
 
?

!-!

Chris, sorry, I missed something in your original question - I missed
that you asked about a CORPORATION, I assumed you were asking about an
unincorporated business - proprietorship or partnership - because you
asked about "owner's equity" and "draws". A corporation does NOT have
"Draws", and its equity is commonly referred to as Shareholders'
Equity rather than Owner's Equity (a minor matter of terminology and
not significant, but the question of "draws" is important).

Because a corporation does not have "draws", payments to the owners
(shareholders) must be designated as loans to the shareholders,
payment of dividends, payment of salary or bonus, or payment of
management or director's fees. Each of these has significant tax
implications.

It is time to consult your accountant. Failure to understand what you
are doing in this area, and to consider the tax implications, can
result in very nasty tax surprises a few months or years later.


Chris said:
Thanks kindly for your reply

I just thought I was missing something since the Quickbooks help said
that it is based on the company profit so I thought I was doing
something wrong since it didn't appear on the P and L's

Thanks for your help

Cya
 
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S

Stephanie Serba

Typically, an owner ina corporation can take draws against a loans account.
Frequently the shareholder/owner will have his bonuses or dividends (for a
privately held corp) applied to a loans account so draws can be made against
the owner's loan to the company.


--
Stephanie Serba, AICIA
Partner, Durham Business Outsource
Accounting and Technology
www.dbo.ca
smserba <at> dbo <dot> ca


!-! said:
Chris, sorry, I missed something in your original question - I missed
that you asked about a CORPORATION, I assumed you were asking about an
unincorporated business - proprietorship or partnership - because you
asked about "owner's equity" and "draws". A corporation does NOT have
"Draws", and its equity is commonly referred to as Shareholders'
Equity rather than Owner's Equity (a minor matter of terminology and
not significant, but the question of "draws" is important).

Because a corporation does not have "draws", payments to the owners
(shareholders) must be designated as loans to the shareholders,
payment of dividends, payment of salary or bonus, or payment of
management or director's fees. Each of these has significant tax
implications.

It is time to consult your accountant. Failure to understand what you
are doing in this area, and to consider the tax implications, can
result in very nasty tax surprises a few months or years later.
 

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