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How to Record Owner's Draw in QuickBooks

· 3 min read
Debits

Introduction​

Recording owner's draw in QuickBooks is essential for maintaining accurate financial records, especially for sole proprietors and partnerships. Owner's draw refers to the money that business owners withdraw from their business for personal use. This guide provides a step-by-step process to record owner's draw in QuickBooks Desktop and QuickBooks Online.

Recording Owner's Draw in QuickBooks Desktop​

Step 1: Set Up an Owner's Draw Account​

  1. Open QuickBooks Desktop: Launch QuickBooks and log in with your credentials.
  2. Go to Chart of Accounts: Navigate to Lists > Chart of Accounts.
  3. Create a New Account: Click Account > New.
  4. Select Account Type: Choose Equity and click Continue.
  5. Name the Account: Enter a name such as "Owner's Draw" and click Save & Close.

Step 2: Record the Owner's Draw​

  1. Open Write Checks: Go to Banking > Write Checks.
  2. Select Bank Account: Choose the bank account from which the draw will be taken.
  3. Enter Payee: In the Pay to the Order of field, enter the owner's name.
  4. Enter Amount: Fill in the amount of the draw.
  5. Select Account: In the Expenses tab, choose the "Owner's Draw" account.
  6. Save and Close: Click Save & Close to record the transaction.

Step 3: Review the Transaction​

  1. Go to Register: Navigate to Banking > Use Register.
  2. Select Bank Account: Choose the bank account used for the draw.
  3. Verify Transaction: Ensure the owner's draw transaction is accurately recorded.

Recording Owner's Draw in QuickBooks Online​

Step 1: Set Up an Owner's Draw Account​

  1. Open QuickBooks Online: Log in to QuickBooks Online with your credentials.
  2. Go to Chart of Accounts: Navigate to Accounting > Chart of Accounts.
  3. Create a New Account: Click New.
  4. Select Account Type: Choose Equity.
  5. Name the Account: Enter a name such as "Owner's Draw" and click Save and Close.

Step 2: Record the Owner's Draw​

  1. Open Expense Transaction: Click on + New > Expense.
  2. Select Bank Account: Choose the bank account from which the draw will be taken.
  3. Enter Payee: In the Payee field, enter the owner's name.
  4. Enter Amount: Fill in the amount of the draw.
  5. Select Account: In the Category field, choose the "Owner's Draw" account.
  6. Save and Close: Click Save and Close to record the transaction.

Step 3: Review the Transaction​

  1. Go to Transactions: Navigate to Accounting > Chart of Accounts.
  2. Select Bank Account: Choose the bank account used for the draw.
  3. Verify Transaction: Ensure the owner's draw transaction is accurately recorded.

Best Practices for Recording Owner's Draw​

  • Regular Updates: Ensure all draws are recorded promptly to maintain accurate financial records.
  • Clear Documentation: Keep clear documentation of all owner's draw transactions for tax purposes.
  • Separate Accounts: Maintain separate accounts for owner's draw and other equity transactions to avoid confusion.
  • Consult with an Accountant: Regularly consult with an accountant to ensure compliance with tax regulations and proper accounting practices.

Conclusion​

Recording owner's draw in QuickBooks is a straightforward process that helps maintain accurate and organized financial records. By following the steps outlined in this guide, you can effectively manage owner's draw transactions in both QuickBooks Desktop and QuickBooks Online. Implementing best practices will further ensure accurate financial reporting and compliance with tax regulations.