im watching your video in 2023 and believe me i spent many days understanding equity from many new videos but surprisingly this 11 years old video perfectly told me what to do and cleared my core concept hats off sir
As someone who is just starting to learn quickbooks and bookkeeping, your videos are great and detailed without the boring fluff. Much appreciated. Thanks
Watched your cast completely. The process seemed redundant but, forgot you said, this is a vehicle for tracking petty cash transactions in QB. Now I know what to do when I come across receipts paid by personal means. You're the man, Thanks.
I come back to this video all the time (I have a one man engineering company and tend to let the bookkeeping slide for extended lengths of time). I searched a ton of ways to do this and came across this a few years ago and come back for a refresher when the stuff really piles up (like today!). Great job, exactly what I needed.
Thanks Brian! So glad this helps! You might also like this video: If You Mix Up Personal And Business Expenses In Quickbooks Online th-cam.com/video/XbbbFcVGoTA/w-d-xo.html
Yes. I just teach the petty cash method for people who don't want to post journal entries. Also if you have a lot of transactions like this you will probably find it much easier to post checks than to post lots of journal entries.
Hi! The idea is that the petty cash items are things that were paid for by the shareholder. So I close it out monthly to the Shareholder contributions account. This way it ultimately shows that the shareholder contributed to the business. You could just book journal entries, debit expense, credit S/H contribution. That's how I do it. This method is for people who are afraid of Journal Entries :)
Its awesome. I am new to my business and literally spend around 2-3 hours until i found your video. i was confused with other links. Everyone was telling about creating those 3 accounts-equity,investments,drawing but nobody was clearly mentioning what happens to my intital investments after i register them in equity. Actually my mistake was i was providing an initial balance of the equity and i was trying to bank deposit thinking that it will transffer from my equity to bank and then i will be able to use it for expenses/purchases. However, i was wrong. Equity stays for ever until owner draws it. Purchase/expense happens from bank/pretty cash and they balance out. i am new and it might be very easy thing for others but i am sure many folks like me will be benefited from this..I definitely like to recommend you in case somebody need some help...Thanks a lot.
Holy Cow! Thank You! I'm a science buff and always relish when you hit one of those a-ha moments! Then I smile! Just watched this tutorial.... it left me smiling. I'm off to Quickbooks. Hopefully this won't be as drag of a weekend as I thought it might be! Cheers, Seth!
Hi. If you've loaned money to the business then when you write yourself a check to repay that loan, you simply record it through that same account you used when you loaned the money; shareholder loans (Liability) or Shareholder Distributions (Equity). The money runs through the balance sheet both in and out which means, no income or expenses are ever touched.
just started an S-Corp and this video was incredibly helpful! Only suggestion would be to make a video with the new version of QuickBooks... but i feel like everyone should be able to take what you've taught us here and replicate it in the new version. Thanks so much!
Thanks Steven. We are actually in the process of completely re-designing NerdEnterprises.com. Once that is done, we will begin rolling out all updated content with videos (of course) on a lot of these same topics. Much emphasis will be place on QuickBooks Online, of course, but we'll also look at some of the topics in the desktop version.
Thanks I am not sure what you are referring to here? Unless you are talking about a purchase for re-sale then you really can just book the whole total including sales tax to the appropriate expense account. If it is a purchase for re-sale then you want to split the transaction and post the sales tax portion to Sales Tax Payable.
Hi! Essentially you can create a petty cash account (bank account) and write checks out of it. Then each month close out the petty cash balance by recording a deposit and book that deposit to "Shareholder Contributions."
I have a complicated scenario where I have a personal card (in my name) that I use in my business. I am cash basis LLC. I intially paid it off with personal funds. I then ceased doing this learning it was not best practice, and started having the LLC pay the card off. I am trying to figure out how to expense all these charges. Because its a personal card (in my name) would all charges not be DR expense CR equity? How do the payments reconcile when for example I overpay the card with personal funds or business funds? Should I track these as liabilities?
Thank for you great information. I have 2 questions: 1. Why does the Petty Cash account reflect in Shareholders? In what way are they connected? 2. Instead of the Petty Cash Account, could you just enter transactions in under the Share Holders distributions and track each transaction that way?
Thanks, so I am thinking the easiest way to do receipts is to enter thru a write cheque in the petty cash account, expense it out the proper expense account, keeping the journal entries for large contributions and distributions, then do a deposit at the end of each month for the petty cash amount to owners contributions.
Hi there - I appreciate your videos. In this one, you reference "another video" about posting journals (instead of using the Petty Cash option). Can you point me in that direction? I couldn't tell from the titles of your videos which one it was that I should watch. Thanks so much!
Thanks, I've learned a lot from your videos. My question is why you don't record the transaccion for the tax paid in the purchase? I know I shoud do it but how?
This is a great video and I must add that you are a great speaker! I wonder to see a video on if a Business Credit card is used for personal use, how these transactions are booked in quickbooks? I have a S Corp with 3 share holders on 34, 33, 33 split. One guy keep on using the card for his personal use, whereas others don't. So how do we book this?
I don't use the desktop versions any longer, but check online. There are usually people (used to be Charlie Russel but I'm guessing he's retired by now) who will write up articles explaining if there are any issues with updates.
Thank for the video. two questions if possible.. How do you record increases and/or decreases to the capital account(Lets say these funds were used for trading stocks) Do I need to create a separate company if I want to keep track of both business and personal finances? Thanks in advance
I'm assuming (s)he wants the investment into the business in the LT Liab, and the ST Liab would be for subsequent loans made. You can do it this way, but it tells a different story. Treating it as a "loan" means I intend for it to be paid back. Putting it in Equity means it's an investment that may or may not be.
is it ok to put the staples transaction directly in shareholder contribution instead of creating petty cash and balancing the at the end of the month? thanks.
Hello, great tutorial......I have a question though.......I set up the Shareholder Capital account along with the contribution and distribution.....my question though is that I have a carry forward balance to put in there and I cannot make a deposit in the Bank because it was deposited in my old system. I did an opening balance when I created the account, put it placed it in Opening Balance Equity, not in the Shareholder Equity. Is this okay or is there a way of moving it out of there and into Shareholder Capital?
Thank you for this excellent and informative video. I do have one ?. If I have a C corp, I paid out of my own pockets for some expenses like worker's comp insurance, office supplies (Staples) etc. How do I reimburse myself on QB? I need to create a petty cash account (Bank)y? Then Write a check made out to Worker's comp and Staples out of my petty cash? Lastly I need to make a deposit under owner's contribution? Are these the right steps? Thanks a million.
Yes. That's the easiest way to record what you've paid for with personal funds, and then close it out to Owner Contributions, so that it all shows up properly on the Balance Sheet.
This is great…except I very much use petty cash ( change for markets/sales etc). What else can one call the out of pocket use of cash for the owner's contribution or draw?
These videos are great - so happy I finally found them!! Wondering if you had any advice (or could record a video) to show how a small home based business would record a rental payment to the Owner? And to take it a step further to have that rental payment show up/print on a 1099....
+Tamara Nicklas If the home based business has no entity (eg Corp, or LLC) then you can write a check from the company to the owner, but the company's rent expense, will be the owners rental income, so it's kind of a wash. Otherwise you would write a check from the corp or llc to the individual, and book it to rent expense.
Great video! I have a question about shareholder's contributions and petty cash. If I create a petty cash account, does that mean only cash transactions can be entered which were paid by owner. What if some of the transactions were made by owner's debit card. Anotherwards, does it have to petty cash only?
I have a stupid question. When you created your Petty Cash account your "Tax Line Mapping" selection read : B/S Cash. Can you expand on when that means. I don't have that as a selection on my list. Thanks!
Thank you so much. I have an LLC (but it's just me). I'm trying to go back through last year's statements and assign categories for past purchases made out of my personal account since, back then, I was mixing business and personal expenses (now, I've separated them). Inside my personal account, should these business purchases be "Business expense" or "owner contribution"? And, within my business account, if I pay for rent (personal) out of my business funds, is it considered a "Member draw" within my business account?
Amy Satori hi. if the business pays a personal expense, it's an owner draw. if you pay a business expense from personal, that can go to an asset account called investment in business. then on the business books, you record the expenses, as owner contributions. easiest way is with a journal entry. debit the expense, and credit owner contributions.
Thank you for the great info. Can this be used also when a Shareholder pays for a personal expense with a company checking account? As a distribution instead of a contribution though. What happens at the end of the year? Would that distribution be taxable if left on the books?
Sir please tell me if i share net profit to partners who should i deal in quickbooks ? which is appropriate methods i dont want to show in drawings accounts need your help on urgent bases or if you have any video then share me the link. thanks
Hello, I do love your videos they are very helpful. I do have a question: Timestamp 5:42 on this video shows you putting money from your account into your shareholder contribution account. Currently, my shareholder capital runs a Negative balance. I never put money into that account when I set up Quickbooks and my distributions are larger than my contributions /purchases. However when I do the entry as you show it. I come up with a deposit in my bank account (Now showing more money than I have in the account) Not sure how to fix. Please advise. (PS> my opening balance equity is also negative?)
Hi! You would only enter a deposit into your bank account if you were actually depositing money. And if that money was a contribution from you, the owner, to your business then that's why you would record that deposit to Shareholder Contributions. The distributions account will normally be negative because it represents Equity withdrawn from the business. The contributions account will be positive because it represents money you've put INTO the business. That's why I like laying them out in separate subaccounts - so you can see clearly what you've put in vs taken out, and then the net.
I have a question, whenever you pay yourself as an SCorp.... In QB 2016, do you pay yourself as a Vendor or Employee or Customer? It does not give you an option on QB2016 to check "other" as seen you in your video. Thanks
Can you do a video on credit cards, how transactions are done whether the card is personal (in your name / ssn) and if the card is business (business name /ein) and how to reconcile transactions on the cards, and if the card is paid off with personal funds (and what happens) and if the card is paid off with LLC funds instead (and what happens), and how to reconcile these payments on the card statments
OK, this is the video I was referencing. I was told by the CPA to enter the initial owner invest as a Long Term Liability account 'Notes Payable, Owner's Name'. And create a Current Liability account 'Advance, owner's name'. This really isn't making sense on how/why to do this. Thoughts? I know you touched on this in the video... but still confused.
I have been looking for a video tutorial that talks about distributions and contributions. I have taken a position for a realtor company, this company use to out-source my previous employer which was a property management. Funny how I am now working for the client...lol...blessed actually... So my questions is, where do I record a final distribution check? It's a distribution on the property management side, does that mean it's a contribution transaction to record on my end, or am I hitting the distribution GL account as well since it's a final check to close out the account and not conduct business with the property management anymore...any suggestions would help...thank you for the video as well, it helped me understand some aspects of capital GL codes.
This really depends on how the accounting has been handled all along. Normally when I have a client who works with a property management company, we keep a "Bank" account which really represents the monies the property management company are holding "in trust" for us. This is the right way to do it. So when a distribution is made from those funds, on our books it's just a transfer from that bank account to our operating account.
Should a personal card used in my LLC be on the books as a liability account, or should it not be on the balance sheet, and simply have journal transactions from the card as equity? IE: DR expense CR equity? Can either be used?
We have a S Corp Business. Our business owes us from shareholder loans. The business made money. And we would like to pay back the money we contributed from the shareholder loans. What is the process to pay ourselves back and not get taxed as income when the business owes us money in a Schedule K1?
I created a Petty Cash Account for Owner Contributions and Distributions and I'm currently using Quick-books Online Essentials, instead of creating a Check to record these types of transactions can they be recorded under Expense instead ?
Hello, Im a bookkeeper for a company that has been in business for over a year, no one has done the books at all! so there are 5 partners in a s-corp, the client was supposed to start paying them a budget salary, but city is holding the building of the lots. Anyway, they keep taking out money from an ATM as cash to distribute to the 5 partners since the first of the year. I have listed each partner as a vendor partner equity. how would you go about tracking that per partner? and any time they do that in the future(which they will not do any more).
I kind of watched your video 3 (maybe 4) times, not because it is hard to understand but because I wanted to really really know what you're explaining perfectly. All of the sudden I realized what you meant with a journal entry, and I ended up entering those investments from my personal account debiting my Equipment account and crediting my Member Contribution for the same amount. The question I would have is, what do you do when a credit from a personal account has been used and the financing is for 12 months. Do you make deposits to the business account, and make regular monthly payments to that personal credit card as an expense towards whichever account applies to what was purchased?
If I understand correctly, then I would record it exactly as you described above, except show it as a loan, and record the payments as an offset to that loan. So it just hits a different section of the balance sheet.
+George S (JustPlainMusic) A lot of people don't like to do journal entries. Many accountants and bookkeepers don't like letting their clients do them. For my part, they serve their purpose, in certain cases. In other words, the right tool for the right job. The thing to keep in mind is that journal entries have their limitations. You can't touch items, and there are certain reports that won't show them. The petty cash thing makes it easier for many people, and it also gives you the ability to include all of the details that you might want on that transaction.
Yes it is ok for owner's capital to be negative. What it suggests is that you've drawn out more than you put in (and possibly beyond your cumulative earnings). Where you want to be careful on this is with an S-Corp. If you draw more than your income you could be looking at a taxable event! Next time call ME :)
You book the personal charges as a Shareholder Distribution. Use an Equity account that is specific to the shareholder so you can see how much he has withdrawn from the company.
I need to show a $200 monthly subtraction to the food cost expense account, then put it in the owner distribution account. The owner bought restaurant food and personal food at the same time. I tried a journal entry with debit to food and credit to owner. dist but it didn't work. Can you help? Thank you
If you have 2 or 3 partners in a business,, I guess you would have to do a owners Cap. account with contrib. & distrib. in each partners name? Same with petty cash accounts.
Hey Seth, I am wondering if there is a way in Quickbooks to set up a direct deposit to pay my shareholder distributions to the owner and his wife for their weekly pay?
Yes. Unless there's a good reason for doing otherwise, I set the accounts up for tax basis accounting. This makes it easier for my clients to get their returns prepared at tax time.
I'm very concern, my accountant has an emergency and she would no be able to continue working with me. I spoke with a new accountant and she told me to change capital contribution from equity to liability otherwise I have to pay taxes over the withdrawals, is that correct?
Hi! If you took inventory for personal use / consumption then just sell it for 0. In other words, post an invoice for the sale, but charge $0.00 for it. That will move it's cost to COGS and get it out of inventory. If you don't want to cost it to the company, then you can record a journal entry - Debit Draws, Credit COGS (After you post that invoice) just for the cost (not what you'd sell it for).
What if you have a group of investors who each contribute money to an LLC to invest in something else? I initially put the money into PAID IN CAPITAL? Is that correct or should in be partner contributions? And when distributions are made annually do those go into Partner Distributions under Equity?
Let me know if I'm understanding correctly. I often make purchases for the 'business' (I'm a non-profit), where a portion of the purchase is personal and a portion is for the business. Would I set up a Petty Cash account and record the business portion there? At this point I don't ever expect the money to come back to me - I assume then that I would just zero out the Petty Cash amount at month end and show it as "Owner's Contribution'. I need to know how much I put into the business and which category it was disbursed to (i.e. rabbit food, vegetables, etc.) Would it show that when I do the Petty Cash thing? Thanks in advance!
I would do it the way you're suggesting, yes. Business portion out of Petty cash. I would make a note of the entire purchase amount, and also of the payment method that was used. This way, if you were ever audited, you can produce the documentation needed to support the expense. Bigger picture, especially with a non-profit, I would avoid doing this. There is so much compliance with non-profits, and you don't want to lose that status. Better to keep it clean. Let the non-profit pay for the non-profit expenses. If you need to contribute money, then deposit cash into the non-profit bank account, and record that as a contribution. A little more work, MUCH better way of doing things. You'll sleep better at night, knowing that you're bullet proof under an audit.
@elegantrose1 Thanks Rhonda. You are right, that is a good way to do it. I recently worked with someone whom I showed how using the method you describe we were able to transfer Pre-paid inventory into the actual inventory by putting a negative line item in the expenses tabs for the value and then in the items tab we added the inventory Quantity and Unit Cost for the same value. The check is '0' and the inventory is updated perfectly!
And whats defined as a "personal" card? Whos name is on the card? Even if the card is personal ie: "in my name and SSN", but I use it for business purposes, is it now considered a "business" card and should I now track this on my books? Please explain :) Also subbed, loved your content. You give the the meat and potatoes compared to all the other fluff on youtube.
Yes. If you want your books to be "bulletproof" then you will want any credit cards used for the business to be in the name of the business. Many people do use cards that are in their name personally as their business card. As long as you aren't also using it for personal expenses, then you shouldn't have any issues.
In that case you wind up with negative Equity - the owner / S/H pulled out more than (s)he made. What some people do in this case is re-class the difference to a loan account.
I followed your instruction creating a Petty Cash account for Owner Contributions and Distributions but I'm currently using Quickbooks Online Essentials and the online version is asking for a detail type and I'm not sure which is the appropriate one to choose. Please help :)
Not sure what you mean. The Category is Bank and then I renamed it Petty Cash but now it wants me to choose one of these detail types Cash on Hand Checking Money Market Rent held in trust Savings Trust Account I'm not sure which is the correct one to choose. Please help
Very helpful information. I just modified my chart of accounts using your model. I still have an existing account called 'Owner Equity'. It has a zero balance now that I've moved things around into the new accounts. Do I still need to keep the 'Owner Equity' account, or should I eliminate it? Thanks, Joe
JoAnn Ramsfield Sorry i am not familiar with FSA? But if it's a deduction then it is a subtraction from the gross pay to arrive a the net. If it needs to be remitted somewhere, then it goes to a liability account. If it's an offset to an expense being paid, then it can be booked as an offset to the related expense.
Thanks Seth, I didnt mean essential details, but asides and digressions... ie: what petty cash was originally, or why someone would pay for company expenses with personal money etc... no disrespect intended !
+George S (JustPlainMusic) Got it. I think that stuff can be important to give context. When someone just tells me what to do, I don't understand it nearly as well as when I understand the reasons behind the method - especially since there can often be different ways of doing the same thing, and no right or wrong, just different philosophies. Some people will come in and say, "that's not what Petty Cash is used for." After doing this a while I've had the experiences of having people criticize me from every possible angle, so I try to head these things off at the pass, so to speak. I've also learned not to take it personally - in fact, I really appreciate the feedback. It helps me improve the quality of my content, which is something I honestly strive to do every single day.
Hi Seth, great explanation! I thought this is what I was looking for put I'm a little stuck with what I would like to do :) I'm in Australia and using an old copy of MYOB to track my private finance with my partner. We recently bought a house and would like to track the equity each is putting into the house using one offset account. All our savings going into the offset account which will be tracking each our contribution as equity and the total of this should reflect our back account balance. However some expenses will be shared, like the loan payments, food, etc and will come out of both our equity and some expenses, like my car for, example, would be my responsibility and reduces only my equity. I still would like to use the reconcile account feature to make sure there are no mistakes made. Is there a simple solution or will I have to make a 'double-double' entry, one for the expense and one to account for the equity? Hope this makes sense.
Hi! Some people like to close them out to retained earnings every Jan 1 (or the first day of the fiscal year) for the previous year. That way you only see current year activity in there. Others like to see the cumulative remain in there so it shows the entire history of what was put in and taken out.
how does quickbooks know to increase the shareholder contribution when you zero'd out the petty cash. Since you said "from account: shareholder contribution" you would think it would decrease.
Think of it like this. If you pay for something out of your own pocket, on behalf of the business, you debit the expense, and credit shareholder contributions. This increases both the expense, and the amount that you've contributed into the business, because the business didn't actually pay for it. With the Petty Cash account, you are simply using a vehicle that makes this easier to record (so you don't have to do a journal entry). You write a check out of petty cash. This means you credit petty cash, and debit the expense (decrease a fictitious bank account, and increase the expense). Next and finally, you want to close out that fictitious bank account. So you record a deposit. Debits increase assets / bank accounts. Debit the bank account, and credit the Shareholder contributions. Credits increase equity accounts. The "From" label in the deposit is a little confusing. It refers to the "typical" scenario, as in getting money "From" a sale, or "from" a payment on accounts receivable. In a sense what we are saying here is that the money we are recording to close out petty cash came "from" the shareholder. In this instance, when a company gets money "from" the shareholder, that shareholder is increasing his/her equity in the business. So you are increasing both cash and equity. Nothing is being decreased.
Okay, now it makes sense. Thanks. As for the different versions of quickbooks, I'm having a hard time deciding which to buy. I"m a single owner s corporation (I'm the owner/employee only) I only have one or two clients per year (service). I don't generate invoices. I just get a 1099 at the end of the year.I give myself salary, distributions. I do my own quarterly reports. My expenses are minimal (insurance, gas)and I use a separate payroll. Would the self-employeed quickbooks be good enough?
Yes, they want to be paid back. But they also make/made a lot of purchases w/ personal funds... and I thought that the CPA wanted me to enter those in the Current Liability account. But, this is not making sense to me. Also, she wanted me to put $1,000 of the initial investment into Capital Stock.
Owner capital shouldn't be negative, correct? I guess my question is in order to take distributions every year, the owner needs to make contributions. Doesn't make sense to me bc it's a wash. Thanks Seth!
Hi Kevin! It can be negative. Essentially that means you drew on your retained earnings (which is the accumulation of net income and losses over the years).
Your sense of humor makes this so much easier to digest
im watching your video in 2023 and believe me i spent many days understanding equity from many new videos but surprisingly this 11 years old video perfectly told me what to do and cleared my core concept hats off sir
As someone who is just starting to learn quickbooks and bookkeeping, your videos are great and detailed without the boring fluff. Much appreciated. Thanks
I just love to listen to Nerd Enterprise. He is precise, logical and knows his accounting. He is my savior! Thanks.
Thank you Maya!
Watched your cast completely. The process seemed redundant but, forgot you said, this is a vehicle for tracking petty cash transactions in QB. Now I know what to do when I come across receipts paid by personal means. You're the man, Thanks.
I feel like 'owe you', after learning so much from your videos for FREE. Thanks for amazing videos!
From.....one of your student you never met :-)
Wow, thank you!
I come back to this video all the time (I have a one man engineering company and tend to let the bookkeeping slide for extended lengths of time). I searched a ton of ways to do this and came across this a few years ago and come back for a refresher when the stuff really piles up (like today!). Great job, exactly what I needed.
Thanks Brian! So glad this helps!
You might also like this video:
If You Mix Up Personal And Business Expenses In Quickbooks Online
th-cam.com/video/XbbbFcVGoTA/w-d-xo.html
Yes. I just teach the petty cash method for people who don't want to post journal entries. Also if you have a lot of transactions like this you will probably find it much easier to post checks than to post lots of journal entries.
Hi! The idea is that the petty cash items are things that were paid for by the shareholder. So I close it out monthly to the Shareholder contributions account. This way it ultimately shows that the shareholder contributed to the business.
You could just book journal entries, debit expense, credit S/H contribution. That's how I do it. This method is for people who are afraid of Journal Entries :)
ive been looking for this advice for a week and this is the first video that explained it the way i needed it explained! thank you SO much!
Its awesome. I am new to my business and literally spend around 2-3 hours until i found your video. i was confused with other links. Everyone was telling about creating those 3 accounts-equity,investments,drawing but nobody was clearly mentioning what happens to my intital investments after i register them in equity. Actually my mistake was i was providing an initial balance of the equity and i was trying to bank deposit thinking that it will transffer from my equity to bank and then i will be able to use it for expenses/purchases. However, i was wrong. Equity stays for ever until owner draws it. Purchase/expense happens from bank/pretty cash and they balance out. i am new and it might be very easy thing for others but i am sure many folks like me will be benefited from this..I definitely like to recommend you in case somebody need some help...Thanks a lot.
Holy Cow! Thank You! I'm a science buff and always relish when you hit one of those a-ha moments! Then I smile! Just watched this tutorial.... it left me smiling. I'm off to Quickbooks. Hopefully this won't be as drag of a weekend as I thought it might be! Cheers, Seth!
Thank you Sir, in my case getting money from investor is not a challenge but being in Harmony with my numbers is, so Thanks again
Hi. If you've loaned money to the business then when you write yourself a check to repay that loan, you simply record it through that same account you used when you loaned the money; shareholder loans (Liability) or Shareholder Distributions (Equity). The money runs through the balance sheet both in and out which means, no income or expenses are ever touched.
just started an S-Corp and this video was incredibly helpful! Only suggestion would be to make a video with the new version of QuickBooks... but i feel like everyone should be able to take what you've taught us here and replicate it in the new version. Thanks so much!
Thanks Steven. We are actually in the process of completely re-designing NerdEnterprises.com. Once that is done, we will begin rolling out all updated content with videos (of course) on a lot of these same topics. Much emphasis will be place on QuickBooks Online, of course, but we'll also look at some of the topics in the desktop version.
10 years later this is still fantastic
Thank you!
Thanks I am not sure what you are referring to here? Unless you are talking about a purchase for re-sale then you really can just book the whole total including sales tax to the appropriate expense account. If it is a purchase for re-sale then you want to split the transaction and post the sales tax portion to Sales Tax Payable.
Hi!
Essentially you can create a petty cash account (bank account) and write checks out of it. Then each month close out the petty cash balance by recording a deposit and book that deposit to "Shareholder Contributions."
You can never hear something like this too often. Thank YOU for the accolades. You just made my day :)
I have a complicated scenario where I have a personal card (in my name) that I use in my business. I am cash basis LLC.
I intially paid it off with personal funds. I then ceased doing this learning it was not best practice, and started having the LLC pay the card off.
I am trying to figure out how to expense all these charges. Because its a personal card (in my name) would all charges not be DR expense CR equity? How do the payments reconcile when for example I overpay the card with personal funds or business funds? Should I track these as liabilities?
Thank for you great information. I have 2 questions:
1. Why does the Petty Cash account reflect in Shareholders? In what way are they connected?
2. Instead of the Petty Cash Account, could you just enter transactions in under the Share Holders distributions and track each transaction that way?
Thanks, so I am thinking the easiest way to do receipts is to enter thru a write cheque in the petty cash account, expense it out the proper expense account, keeping the journal entries for large contributions and distributions, then do a deposit at the end of each month for the petty cash amount to owners contributions.
Hi there - I appreciate your videos. In this one, you reference "another video" about posting journals (instead of using the Petty Cash option). Can you point me in that direction? I couldn't tell from the titles of your videos which one it was that I should watch. Thanks so much!
Thanks, I've learned a lot from your videos.
My question is why you don't record the transaccion for the tax paid in the purchase? I know I shoud do it but how?
This is a great video and I must add that you are a great speaker!
I wonder to see a video on if a Business Credit card is used for personal use, how these transactions are booked in quickbooks? I have a S Corp with 3 share holders on 34, 33, 33 split. One guy keep on using the card for his personal use, whereas others don't. So how do we book this?
Thank you very much appreciated... easy clean and professional!
Thank You for the great system information. Are you doing the 2020 QB information Up Date??
I don't use the desktop versions any longer, but check online. There are usually people (used to be Charlie Russel but I'm guessing he's retired by now) who will write up articles explaining if there are any issues with updates.
Awesome! It is so good to get these comments. I really appreciate it - let's me know I'm doing something right.
Thank for the video. two questions if possible.. How do you record increases and/or decreases to the capital account(Lets say these funds were used for trading stocks) Do I need to create a separate company if I want to keep track of both business and personal finances? Thanks in advance
Yes, that's correct. Each partner gets their own section in the Equity section.
I'm assuming (s)he wants the investment into the business in the LT Liab, and the ST Liab would be for subsequent loans made. You can do it this way, but it tells a different story. Treating it as a "loan" means I intend for it to be paid back. Putting it in Equity means it's an investment that may or may not be.
is it ok to put the staples transaction directly in shareholder contribution instead of creating petty cash and balancing the at the end of the month? thanks.
Hello, great tutorial......I have a question though.......I set up the Shareholder Capital account along with the contribution and distribution.....my question though is that I have a carry forward balance to put in there and I cannot make a deposit in the Bank because it was deposited in my old system. I did an opening balance when I created the account, put it placed it in Opening Balance Equity, not in the Shareholder Equity. Is this okay or is there a way of moving it out of there and into Shareholder Capital?
Thank you for this excellent and informative video.
I do have one ?. If I have a C corp, I paid out of my own pockets for some expenses like worker's comp insurance, office supplies (Staples) etc. How do I reimburse myself on QB?
I need to create a petty cash account (Bank)y?
Then Write a check made out to Worker's comp and Staples out of my petty cash?
Lastly I need to make a deposit under owner's contribution? Are these the right steps?
Thanks a million.
You should check out the QuickBooks Online Community Support at community.intuit.com/quickbooks-online
Lots of help there. Good Luck.
Yes. That's the easiest way to record what you've paid for with personal funds, and then close it out to Owner Contributions, so that it all shows up properly on the Balance Sheet.
This is great…except I very much use petty cash ( change for markets/sales etc). What else can one call the out of pocket use of cash for the owner's contribution or draw?
These videos are great - so happy I finally found them!! Wondering if you had any advice (or could record a video) to show how a small home based business would record a rental payment to the Owner? And to take it a step further to have that rental payment show up/print on a 1099....
+Tamara Nicklas If the home based business has no entity (eg Corp, or LLC) then you can write a check from the company to the owner, but the company's rent expense, will be the owners rental income, so it's kind of a wash. Otherwise you would write a check from the corp or llc to the individual, and book it to rent expense.
Great video! I have a question about shareholder's contributions and petty cash.
If I create a petty cash account, does that mean only cash transactions can be entered which were paid by owner. What if some of the transactions were made by owner's debit card. Anotherwards, does it have to petty cash only?
Spectacular! Thanks so much and please let me know if I can answer any questions you might have!
I have a stupid question. When you created your Petty Cash account your "Tax Line Mapping" selection read : B/S Cash. Can you expand on when that means. I don't have that as a selection on my list. Thanks!
Thank you so much. I have an LLC (but it's just me). I'm trying to go back through last year's statements and assign categories for past purchases made out of my personal account since, back then, I was mixing business and personal expenses (now, I've separated them). Inside my personal account, should these business purchases be "Business expense" or "owner contribution"? And, within my business account, if I pay for rent (personal) out of my business funds, is it considered a "Member draw" within my business account?
Amy Satori hi. if the business pays a personal expense, it's an owner draw.
if you pay a business expense from personal, that can go to an asset account called investment in business. then on the business books, you record the expenses, as owner contributions. easiest way is with a journal entry. debit the expense, and credit owner contributions.
Thank you for the great info. Can this be used also when a Shareholder pays for a personal expense with a company checking account? As a distribution instead of a contribution though. What happens at the end of the year? Would that distribution be taxable if left on the books?
Sir please tell me if i share net profit to partners who should i deal in quickbooks ? which is appropriate methods i dont want to show in drawings accounts need your help on urgent bases or if you have any video then share me the link. thanks
Hello, I do love your videos they are very helpful. I do have a question: Timestamp 5:42 on this video shows you putting money from your account into your shareholder contribution account. Currently, my shareholder capital runs a Negative balance. I never put money into that account when I set up Quickbooks and my distributions are larger than my contributions /purchases. However when I do the entry as you show it. I come up with a deposit in my bank account (Now showing more money than I have in the account) Not sure how to fix. Please advise. (PS> my opening balance equity is also negative?)
Hi! You would only enter a deposit into your bank account if you were actually depositing money. And if that money was a contribution from you, the owner, to your business then that's why you would record that deposit to Shareholder Contributions.
The distributions account will normally be negative because it represents Equity withdrawn from the business.
The contributions account will be positive because it represents money you've put INTO the business.
That's why I like laying them out in separate subaccounts - so you can see clearly what you've put in vs taken out, and then the net.
@@nerdenterprises Thank you.
I have a question, whenever you pay yourself as an SCorp.... In QB 2016, do you pay yourself as a Vendor or Employee or Customer? It does not give you an option on QB2016 to check "other" as seen you in your video. Thanks
Can you do a video on credit cards, how transactions are done whether the card is personal (in your name / ssn) and if the card is business (business name /ein) and how to reconcile transactions on the cards, and if the card is paid off with personal funds (and what happens) and if the card is paid off with LLC funds instead (and what happens), and how to reconcile these payments on the card statments
I have a course that covers this and a lot more.
new.nerdenterprises.com/bulletproof
OK, this is the video I was referencing. I was told by the CPA to enter the initial owner invest as a Long Term Liability account 'Notes Payable, Owner's Name'. And create a Current Liability account 'Advance, owner's name'. This really isn't making sense on how/why to do this. Thoughts? I know you touched on this in the video... but still confused.
Can I set up weekly member contributions for my S-Corp if I don't have all the startup money needed to get going?
Great video for us noobs. Thank You!
So glad you still have your hair and that I could help you keep it :)
You would have to split the transaction and show the sales taxes paid as a debit to sales tax payable.
Yes. I have a video on "entering receipts" that walks you through this but it sounds like you know what to do :)
This is the most helpful video I've ever watched. Thank you so much! =)
Thanks Kathy! Glad you liked it :)
I have been looking for a video tutorial that talks about distributions and contributions. I have taken a position for a realtor company, this company use to out-source my previous employer which was a property management. Funny how I am now working for the client...lol...blessed actually...
So my questions is, where do I record a final distribution check? It's a distribution on the property management side, does that mean it's a contribution transaction to record on my end, or am I hitting the distribution GL account as well since it's a final check to close out the account and not conduct business with the property management anymore...any suggestions would help...thank you for the video as well, it helped me understand some aspects of capital GL codes.
This really depends on how the accounting has been handled all along.
Normally when I have a client who works with a property management company, we keep a "Bank" account which really represents the monies the property management company are holding "in trust" for us. This is the right way to do it. So when a distribution is made from those funds, on our books it's just a transfer from that bank account to our operating account.
Awesome! I love knowing about it when something I've done has really helped someone! Thanks!
YOU sir, have just earned yourself another sub! Thanks for the great info!
Should a personal card used in my LLC be on the books as a liability account, or should it not be on the balance sheet, and simply have journal transactions from the card as equity? IE: DR expense CR equity? Can either be used?
Watch this video I think it will help you a lot --> th-cam.com/video/XbbbFcVGoTA/w-d-xo.html
We have a S Corp Business. Our business owes us from shareholder loans. The business made money. And we would like to pay back the money we contributed from the shareholder loans. What is the process to pay ourselves back and not get taxed as income when the business owes us money in a Schedule K1?
I created a Petty Cash Account for Owner Contributions and Distributions and I'm currently using Quick-books Online Essentials, instead of creating a Check to record these types of transactions can they be recorded under Expense instead ?
I love the way how you explain. Thanks!!!
I am the owner of a non-profit and I be a contributor and is it a certain amount I can contribute?
Hello, Im a bookkeeper for a company that has been in business for over a year, no one has done the books at all! so there are 5 partners in a s-corp, the client was supposed to start paying them a budget salary, but city is holding the building of the lots. Anyway, they keep taking out money from an ATM as cash to distribute to the 5 partners since the first of the year. I have listed each partner as a vendor partner equity. how would you go about tracking that per partner? and any time they do that in the future(which they will not do any more).
omg! Seth, you're a wonderful teacher. Love your videos. tfs.
I kind of watched your video 3 (maybe 4) times, not because it is hard to understand but because I wanted to really really know what you're explaining perfectly. All of the sudden I realized what you meant with a journal entry, and I ended up entering those investments from my personal account debiting my Equipment account and crediting my Member Contribution for the same amount.
The question I would have is, what do you do when a credit from a personal account has been used and the financing is for 12 months. Do you make deposits to the business account, and make regular monthly payments to that personal credit card as an expense towards whichever account applies to what was purchased?
If I understand correctly, then I would record it exactly as you described above, except show it as a loan, and record the payments as an offset to that loan. So it just hits a different section of the balance sheet.
Awesome, thank you explaining that.
the journal entry method sounds simple compared to the petty cash thing? or am I missing something?
+George S (JustPlainMusic) A lot of people don't like to do journal entries. Many accountants and bookkeepers don't like letting their clients do them. For my part, they serve their purpose, in certain cases. In other words, the right tool for the right job. The thing to keep in mind is that journal entries have their limitations. You can't touch items, and there are certain reports that won't show them. The petty cash thing makes it easier for many people, and it also gives you the ability to include all of the details that you might want on that transaction.
Yes it is ok for owner's capital to be negative. What it suggests is that you've drawn out more than you put in (and possibly beyond your cumulative earnings). Where you want to be careful on this is with an S-Corp. If you draw more than your income you could be looking at a taxable event!
Next time call ME :)
Man, I like this guy!!!
Thanks!
All I have to say currently is that your funny and smart. Thanks for the video.
Thank you Jennifer!
You're welcome Seth!
You book the personal charges as a Shareholder Distribution. Use an Equity account that is specific to the shareholder so you can see how much he has withdrawn from the company.
I need to show a $200 monthly subtraction to the food cost expense account, then put it in the owner distribution account. The owner bought restaurant food and personal food at the same time. I tried a journal entry with debit to food and credit to owner. dist but it didn't work. Can you help? Thank you
Why does the Net Income show a -$200.00 since the Petty Cash month end close out
your aside comments are super useful for understanding. thanks for sharing your knowledge
Thank you Sonny!
How would the company realize the Input tax credit of a purchase made by the owners own cash if it is entered thru a journal entry.
If you have 2 or 3 partners in a business,, I guess you would have to do a owners Cap. account with contrib. & distrib. in each partners name? Same with petty cash accounts.
Hey Seth, I am wondering if there is a way in Quickbooks to set up a direct deposit to pay my shareholder distributions to the owner and his wife for their weekly pay?
Would you set up the equity accounts for an LLC classified as an S-Corp in the same way ?
Yes. Unless there's a good reason for doing otherwise, I set the accounts up for tax basis accounting. This makes it easier for my clients to get their returns prepared at tax time.
Thank you for your video. It was very helpful.
I'm very concern, my accountant has an emergency and she would no be able to continue working with me. I spoke with a new accountant and she told me to change capital contribution from equity to liability otherwise I have to pay taxes over the withdrawals, is that correct?
What if your draws are with inventory items? How would you track that?
Hi! If you took inventory for personal use / consumption then just sell it for 0. In other words, post an invoice for the sale, but charge $0.00 for it. That will move it's cost to COGS and get it out of inventory. If you don't want to cost it to the company, then you can record a journal entry - Debit Draws, Credit COGS (After you post that invoice) just for the cost (not what you'd sell it for).
What if you have a group of investors who each contribute money to an LLC to invest in something else? I initially put the money into PAID IN CAPITAL? Is that correct or should in be partner contributions? And when distributions are made annually do those go into Partner Distributions under Equity?
Caitlin Hall I'd show a separate equity account for each investor.
Let me know if I'm understanding correctly. I often make purchases for the 'business' (I'm a non-profit), where a portion of the purchase is personal and a portion is for the business. Would I set up a Petty Cash account and record the business portion there? At this point I don't ever expect the money to come back to me - I assume then that I would just zero out the Petty Cash amount at month end and show it as "Owner's Contribution'. I need to know how much I put into the business and which category it was disbursed to (i.e. rabbit food, vegetables, etc.) Would it show that when I do the Petty Cash thing? Thanks in advance!
I would do it the way you're suggesting, yes. Business portion out of Petty cash. I would make a note of the entire purchase amount, and also of the payment method that was used. This way, if you were ever audited, you can produce the documentation needed to support the expense.
Bigger picture, especially with a non-profit, I would avoid doing this. There is so much compliance with non-profits, and you don't want to lose that status. Better to keep it clean. Let the non-profit pay for the non-profit expenses. If you need to contribute money, then deposit cash into the non-profit bank account, and record that as a contribution. A little more work, MUCH better way of doing things. You'll sleep better at night, knowing that you're bullet proof under an audit.
@elegantrose1 Thanks Rhonda. You are right, that is a good way to do it. I recently worked with someone whom I showed how using the method you describe we were able to transfer Pre-paid inventory into the actual inventory by putting a negative line item in the expenses tabs for the value and then in the items tab we added the inventory Quantity and Unit Cost for the same value. The check is '0' and the inventory is updated perfectly!
And whats defined as a "personal" card? Whos name is on the card? Even if the card is personal ie: "in my name and SSN", but I use it for business purposes, is it now considered a "business" card and should I now track this on my books? Please explain :)
Also subbed, loved your content. You give the the meat and potatoes compared to all the other fluff on youtube.
Yes. If you want your books to be "bulletproof" then you will want any credit cards used for the business to be in the name of the business.
Many people do use cards that are in their name personally as their business card. As long as you aren't also using it for personal expenses, then you shouldn't have any issues.
Seth God Bless you and keep you teaching ,,Thank so much or your time!! and kwnoledge..
In an S-corp situation what if the distribution is being taken from company profits and there is not enough in the Contributions section?
In that case you wind up with negative Equity - the owner / S/H pulled out more than (s)he made. What some people do in this case is re-class the difference to a loan account.
Thanks for what you do! You're awesome!!! You've probably already heard that, right???
Is there a way to show a breakdown of disbursements to shareholders?
Jamie Landrum assuming they're booked to a single distribution account, then run the balance sheet, double click, and adjust your dates accordingly.
I followed your instruction creating a Petty Cash account for Owner Contributions and Distributions but I'm currently using Quickbooks Online Essentials and the online version is asking for a detail type and I'm not sure which is the appropriate one to choose. Please help :)
Choose bank account, just like the main account type.
Not sure what you mean. The Category is Bank and then I renamed it Petty Cash but now it wants me to choose one of these detail types
Cash on Hand
Checking
Money Market
Rent held in trust
Savings
Trust Account
I'm not sure which is the correct one to choose.
Please help
Cash on hand.
Very helpful information. I just modified my chart of accounts using your model. I still have an existing account called 'Owner Equity'. It has a zero balance now that I've moved things around into the new accounts. Do I still need to keep the 'Owner Equity' account, or should I eliminate it? Thanks, Joe
Thanks Joseph! I would make it inactive, or delete it. No need to have it there any longer.
Super. Thanks for the quick response! I've already started in on your other videos. Very helpful and to the point.
Joseph Hinkens Thank you! Let me know if you need any help finding anything!
Thanks Seth,
I like your QB videos.
I need to setup FSA pretax dollars - how to show it on paycheck?
JoAnn Ramsfield Sorry i am not familiar with FSA? But if it's a deduction then it is a subtraction from the gross pay to arrive a the net. If it needs to be remitted somewhere, then it goes to a liability account. If it's an offset to an expense being paid, then it can be booked as an offset to the related expense.
kindly plz explain how to manage inter company accounts in Quickbook Premier 2015
+Farhan Shahid It's a little too broad of a question to answer. If you can be more specific, I would be happy to answer your question.
Sir have u any software to transfer the data from excel to quickbooks.
SaasAnt works amazingly well!
Is it compatible for desktop 2018.
@@MuhammadUsman-vz3kv I couldn't say. You'd have to reach out to the company and ask them.
Ok thanks dear.
Thanks Seth, I didnt mean essential details, but asides and digressions... ie: what petty cash was originally, or why someone would pay for company expenses with personal money etc... no disrespect intended !
+George S (JustPlainMusic) Got it. I think that stuff can be important to give context. When someone just tells me what to do, I don't understand it nearly as well as when I understand the reasons behind the method - especially since there can often be different ways of doing the same thing, and no right or wrong, just different philosophies. Some people will come in and say, "that's not what Petty Cash is used for."
After doing this a while I've had the experiences of having people criticize me from every possible angle, so I try to head these things off at the pass, so to speak. I've also learned not to take it personally - in fact, I really appreciate the feedback. It helps me improve the quality of my content, which is something I honestly strive to do every single day.
Hi Seth, great explanation! I thought this is what I was looking for put I'm a little stuck with what I would like to do :) I'm in Australia and using an old copy of MYOB to track my private finance with my partner. We recently bought a house and would like to track the equity each is putting into the house using one offset account. All our savings going into the offset account which will be tracking each our contribution as equity and the total of this should reflect our back account balance. However some expenses will be shared, like the loan payments, food, etc and will come out of both our equity and some expenses, like my car for, example, would be my responsibility and reduces only my equity. I still would like to use the reconcile account feature to make sure there are no mistakes made. Is there a simple solution or will I have to make a 'double-double' entry, one for the expense and one to account for the equity? Hope this makes sense.
What do I do with these extra contributions at end of the year? They show up in my Bal Sheet for next year...
Hi! Some people like to close them out to retained earnings every Jan 1 (or the first day of the fiscal year) for the previous year. That way you only see current year activity in there. Others like to see the cumulative remain in there so it shows the entire history of what was put in and taken out.
how does quickbooks know to increase the shareholder contribution when you zero'd out the petty cash. Since you said "from account: shareholder contribution" you would think it would decrease.
Think of it like this. If you pay for something out of your own pocket, on behalf of the business, you debit the expense, and credit shareholder contributions. This increases both the expense, and the amount that you've contributed into the business, because the business didn't actually pay for it.
With the Petty Cash account, you are simply using a vehicle that makes this easier to record (so you don't have to do a journal entry). You write a check out of petty cash. This means you credit petty cash, and debit the expense (decrease a fictitious bank account, and increase the expense). Next and finally, you want to close out that fictitious bank account. So you record a deposit. Debits increase assets / bank accounts. Debit the bank account, and credit the Shareholder contributions. Credits increase equity accounts.
The "From" label in the deposit is a little confusing. It refers to the "typical" scenario, as in getting money "From" a sale, or "from" a payment on accounts receivable. In a sense what we are saying here is that the money we are recording to close out petty cash came "from" the shareholder. In this instance, when a company gets money "from" the shareholder, that shareholder is increasing his/her equity in the business. So you are increasing both cash and equity. Nothing is being decreased.
Okay, now it makes sense. Thanks. As for the different versions of quickbooks, I'm having a hard time deciding which to buy. I"m a single owner s corporation (I'm the owner/employee only) I only have one or two clients per year (service). I don't generate invoices. I just get a 1099 at the end of the year.I give myself salary, distributions. I do my own quarterly reports. My expenses are minimal (insurance, gas)and I use a separate payroll. Would the self-employeed quickbooks be good enough?
Slap Stick self employed would probably work for you. you can always upgrade if it turns out you need more.
Thanks. Excellent teacher!!
Thank you so much!
You rock! Excellent tutorial. Thank you.
Thank you!!
Yes, they want to be paid back. But they also make/made a lot of purchases w/ personal funds... and I thought that the CPA wanted me to enter those in the Current Liability account. But, this is not making sense to me. Also, she wanted me to put $1,000 of the initial investment into Capital Stock.
Owner capital shouldn't be negative, correct? I guess my question is in order to take distributions every year, the owner needs to make contributions. Doesn't make sense to me bc it's a wash. Thanks Seth!
Hi Kevin! It can be negative. Essentially that means you drew on your retained earnings (which is the accumulation of net income and losses over the years).