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RRgray2021
December 17, 2023
Question

How do I zero out my owner's draw account?

  • December 17, 2023
  • 2 replies
  • 0 views

I am still (extremely) learning how to run my Quickbooks for my company, and still have so many questions. But my main concern I need FAST help on at the moment, is why are all of the personal draws I took from the company last year, showing up in this years draws? My owner's draw account is making it look like I took way more money out than I really did. I have an appointment with my accountant tomorrow, so I am hoping that maybe he will be able to steer me in the right direction with that, but I was hoping to have this figured out before that.

Please no judgement, but I am really confused, and this is only my 2nd year with running these books. 
do I need to zero out my account somehow?

Thanks!

2 replies

BigRedConsulting
BigRedConsulting
December 17, 2023

Equity accounts, just like all other balance sheet accounts, such as your bank accounts, do not reset each year.

    R
    RRgray2021Author
    December 17, 2023

    Thank you, but is there a way that I can make sure the account only shows this year's transactions? 

    Rainflurry
    Rainflurry
    December 17, 2023

    @RRgray2021 

     

    Your owner's draw account is the cumulative total of all draws you have taken out of the business since day 1.  A sole proprietorship (SP) only needs one equity account - Owner's Capital (OC).  OC is the total of your contributions plus your retained earnings minus your draws.  Those 3 accounts should be closed to OC at year-end.  So, look at your balance sheet as of 12-31-22 and close those balances to OC.  If you don't have an OC equity account, set one up. Here is what the journal entry should look like:

     

     DebitCredit
    Retained EarningsXXX 
    Owner's ContributionsXXX 
       Owner's Draws XXX
       Owner's Capital (to balance) XXX

      

    After you make the journal entry to close out the balances as of 12-31-22, any balances left will be for 2023 transactions only. 

      R
      Rrjay
      July 24, 2024

      Hi, I have the same problem with my accounting software, just wondering if you already sort out yours?

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