Equity In QuickBooks Online Explained
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- เผยแพร่เมื่อ 23 ส.ค. 2024
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Index
00:29 Start of the video
00:45 What is the value of your business?
02:15 Standard accounts of equity
03:10 Creating new chart of accounts and subaccounts
06:40 Importance of consistency
08:30 Creating an invoice
08:50 Running and analyzing a profit and loss report
09:12 Running and analyzing the balance sheet
14:49 Crossing over to next year, analyze balance sheet on the new retained earnings
10:57 Demonstrating journal entry on retained earning and distributing to owners capital accounts
12:07 Showing 10:57 on the balance sheet with 0 retained earnings
12:30 Can you also take a distribution from retained earnings?
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Very useful, way more than Quickbooks online tutorials. Thanks for sharing!
Awesome explanation!
Thank you!
very informative video! Thanks for that.
question:
for single member LLC, should I just take the retained earnings to Owner's contribution (or is contribution different from capital) and if I want to take it, debit it on owner's draw?
My current setup is:
OWNER'S EQUITY (Parent):
- Owner's Contribution
- Owner's Draw
Thank you so much.
It's really good.
You're welcome 😊
Hi! You have very informative videos. I have a question, please. I hope you can help me. I have to record the Contribution of each investors in the RL LP General Ledger, but it says it is not a Cash transaction. Could you please give me a light on how should I properly account on this one? Thank you!
what is the paid in capital and surplus sub section, could you explain that more? when would you use this account
Hi! These accounts will normally not be used unless you are a corporation that has issued stock. In short / simple terms that's what those accounts are all about.
Hello! I love all your videos, I always find a great explanation.
I have a quick question:
Owner of the company is taking part of the retaining earning as distribution of the equity from last year. But ,Someone told me to Debit a Distribution acct and Credit the Bank acct. Is this right? bc I see you are using diferent accounts and now I'm little bit confuse.
Could you, please, advise? Thank you very much!
That's the correct journal entry for taking a distribution. Account names can vary as long as it's clear what it is.
But you wouldn't normally need a journal entry for this. If they take a distribution they've written themselves a check or made some kind of payment to themselves. You would simply record that payment to the distributions account.
@@nerdenterprises Thank you very much for your help!
Where would one move a balance from opening balance equity to? In the case of an s-corp with a single shareholder. The opening balance equity was used to set opening balances for the s-corp which did not use Quickbooks last year.
You can move that to Distributions or Contributions. Some people will want to reclass it to Retained Earnings. I don't like that. I like retained earnings to show only net income / losses year over year. That keeps it bulletproof :)
Great video! I have a question about a contributor that has put in money from his other business and then started using the QB payroll and then gave that up and just started writing checks telling me he is taking it from his investment. Should I just make all the payments 'ower's drawings' even though QB took the taxes. Maybe best to do it that way and get the accountants to figure out how they want to do it?? If there is a video on this, please let me know. Appreciate it from a newbie QBO user.
Hi. If someone is paid payroll and the taxes are taken out, then it has to be classified as Payroll Expense.
The payments that were taken out directly by just writing checks, should be recorded as Distributions (against his investment).
Will you please post the capital contributions that Seth and Matthew make? The video skipped that part showing how to post the accounts that you created. Do you recommend posting Matthew and Seth's opening contribution to "opening balance - equity" or to the "shareholder contributions" account you created?
Hi Bill.
Check out this past Friday's Zoom. I think you'll find it answers your questions and well beyond...
new.nerdenterprises.com/products/nerd-buzz/categories/1316455/posts/5856965
Check out this recent Zoom. You'll get a deep dive on the whole Equity section, how I set it up and why:
How Cash Flows - Owner Transactions (Equity or Loan?)
th-cam.com/video/E1IaPAn4aw0/w-d-xo.html
The reason you had to choose Partner's Equity when setting it up, when Quickbooks suggests that is for Partnerships (and we are S Corp) , Does it Matter? Owner's Equity specifically cites S Corp. Please advise.
I Think you are referring to the "Detail Type" in setup? If so that is completely inconsequential. It has no impact on anything, but you have to choose something. One would think that when in the company settings you've chosen Corp or S-Corp, these options would change to reflect the right nomenclature, but they don't.
Great video. if I have a LLC partnership and paid dividend for profits from Q2. how do I record record this,? it should not reduce the equity from initial investment from partners correct? thank you in advance
The initial investment should be in a separate equity account for each partner.
When you pay a dividend it comes out of a different equity account within each partner's equity section.
So the partners have as many as 3 equity sub-accounts
Their Investments.
Capital (where you credit their share of the earnings each year)
And Distributions. This is where you post the dividends paid out. It's really a distribution of equity to them, so it does reduce their total equity.
Nerd Enterprises, Inc. thah makes sense, thank you again
If the owner is taking out money during the year, how can he track this appropriately as he goes. Yes the distributions account will grow negatively but if this is not managed actively, then it is possible to remove too much cash since retained earnings is a yearly thing? All I want to know is if I am removing more than I should. BTW...This was a great video and the missing piece for most novices is how to create that balancing journal entry. "Retained earnings".
Thank you! You can click into the distributions account and run the report for the current year. In some cases, to avoid a taxable event, the difference between cumulative retained earnings and the distributions is reclassified as a Loan to Shareholder. This is really only an issue for S-Corps. For anyone else, if the funds are available they can take them.
Then of course there is a question of whether or not this is a good strategy. Usually it isn't. Better to keep the money in the business and grow the Equity.
@@nerdenterprises I am an LLC whose elected sCorp for tax purposes. I remove a portion of equity monthly. I presumed there is now issue in doing so as this is a pass-through and I have to pay tax on the earning whether I remove them or not. I don't have the type of business where I can put equity bask to work within the company.
I have seen mention. of loans but I am not really sure why most would do this unless they are loaning their equity back to the business to grow it. Is that a fair presumption?
@@iamintractable1805 You don't pay taxes on the distributions. You pay taxes on the net income. You also have to pay yourself "reasonable compensation" in the form of salaries.
The reason for reclassifying distributions as a loan is (a) you intend to put the money back in and (b) as I pointed out above to lower the distributions to an amount that is less than your cumulative retained earnings.
@@nerdenterprises You're splitting hairs because you know what I mean. The answer I believe I was looking for is that I can create a journal entry from retained earnings at any time (even if it takes the account negative). Using the retained balance I can compare it to my net to see if I am removing more than I have. Understanding the retained earning bucket is probably easy for you as a CPA but for non-accounting types it is a void of understanding until one crosses a year.....then that event coupled with information in this video helped me to bridge the gap. The gap being, how to balance the distribution account. As for a loan to the business, its smart to loan ones earnings to the business to grow it. That does not apply to me.
@@iamintractable1805 I generally would not recommend adjusting retained earnings. Normally it should be kept pure as in one closing entry per year based on the net income.
The only exception is when there are 2 or more owners / shareholders and I want to distribute the earnings to their respective capital accounts. Even in this case, retained earnings would not go negative. It would zero out. If there was a loss it would start out as negative, but then you would zero it out to distribute the losses.
Bottom line if you are recording an entry to retained earnings that is causing it to go negative? Something doesn't sound right, but maybe I am not really following what you are trying to do here? If you keep it simple (ie Distributions is distributions and leave retained earnings alone) then it's simple.
Distributions should never be more than retained earnings.
Even with a single owner / shareholder you could manage it this way by closing out retained earnings with a journal entry
The loan we are talking about here would not go from the owner to the business. It's the opposite. If it would otherwise be in distributions, we are talking about reclassifying the distributions to a loan to shareholder.
With ALL of that said!... If you want a REALLY clear blueprint for how to set up your Equity accounts in the cleanest and clearest way possible?
Watch this video 👉 How Cash Flows - Owner Transactions Equity or Loan? 👉 th-cam.com/video/E1IaPAn4aw0/w-d-xo.html
Hello! Love these videos! Can you help me with this. I am a nurse and I own a nurses staffing company taxed as S-corp. I personally work as a nurse on the floor a few days a week and invoice my personal hours with my other employees. Can my personal invoiced amount be documented under shareholder contributions since I am adding money to the business? That way I can keep track of what I have personally contributed to the business so I can distribute only what I personally worked
Thanks!!!
Thank you Chaz!
The amount you invoice is for your income - what you charge your clients for your services, so that can't be classified as a contribution.
As far as recording a contribution for your time (assuming you're not getting paid) there's really nothing you can record.
In short you can't really contribute time. You can only contribute property or money.
@@nerdenterprises do you have a suggestion for me to keep track of the time I work
@@chazturner3207 QuickBooks Time or ClockShark work really well!
I started working for a small LLC. He has Member's Equity & Member's Draw account is set up, however, M Equity only shows like a spreadsheet - there is no balance total.
But my real question is... He has 4 bank accts set up. One is for AR, general ckg, reserve acct, and personal. He is funding his business from his personal account but the transactions aren't set up correctly and I can't figure it out.
When he is transferring money from the personal to the company ckg acct, doesn't it need to be filtered through the equity account? It is only showing up between those 2 accounts and no other record for the equity account.
Please help. I am lost and need this job. Thank you in advance and thank you for your helpful videos!
It sounds like he has his personal bank account on the books, so he's showing it as a transfer between the 2 accounts.
In reality you are correct. That personal bank account should not be on the books. Then money coming into the business account from his personal account would be booked as a deposit, and coded to an equity account like, "Member Contributions."
@@nerdenterprises So what is the best way to correct it? Go to all the transactions and change them to the equity accounts?
@@chelle7_myblueeyeddog You can do that on the deposit side in the business account, but my concern would be if there is other activity in the personal account. That whole account needs to go!
@@nerdenterprises It is only for funding the business. It is not a "true" personal account. What do you think is the best way to go about fixing this? I really appreciate your help.
@@chelle7_myblueeyeddog Then leave it as is. Shouldn't be an issue.
So I've been working with a CPA and I confused the heck out him by categorizing stuff wrong.
When I want to deposit my own personal funds into the company what do I do exactly? I just want to make a member contribution and not a loan.
Account I chose was "Owner's Equity"
Category I chose was "Equity".
Did I do it right?
Sounds fine to me. The only thing I would have done differently is called the Equity account "Owner Contributions" instead of Owner's Equity.
@@nerdenterprises I'll try and change that if possible to Owner's contribution. I'm learning this on the fly right now because as I was looking through the tax form my CPA wrote that I profited over 8000 dollars. I asked him how am is my income over 8000 when I LOSS over 8000! I'm totally confused on what he did and I will assume he messed up somewhere.....so am looking through all of this.
@@nerdenterprises Actually I don't even see "owner contributions" listed for me under equity. I do see Partner Contribution, but it say its for Partnerships. My tax set u p is an S-corp. So the only option I am seeing is Owner's Equity.
@@AndyHTu Yeah just rename Partner Contributions to Shareholder Contributions.
@@nerdenterprises Should I rename it manually or do I have to pick from the selections they have? Does it matter?