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How to Record Owner's Draw in QuickBooks

· 4 min read
Debits

Introduction​

Recording an owner's draw in QuickBooks is essential for maintaining accurate financial records, particularly for sole proprietors and partnerships. An owner's draw represents the funds taken out of the business by the owner for personal use. This guide provides a step-by-step process to record an owner's draw in both 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 as the account type.
  5. Name the Account: Enter a name such as "Owner's Draw" and click Save & Close.

Step 2: Record the Owner's Draw Transaction​

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 Enter the Amount: Specify the amount being withdrawn as the owner's draw.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

Step 3: Review the Transaction​

  1. Go to Register: Navigate to Banking > Use Register.
  2. Select the Bank Account: Choose the bank account from which the draw was made.
  3. Verify the Transaction: Ensure the owner's draw transaction is accurately recorded in the account register.

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 as the account type.
  5. Name the Account: Enter a name such as "Owner's Draw" and click Save and Close.

Step 2: Record the Owner's Draw Transaction​

  1. Create an Expense Transaction: Click on + New > Expense.
  2. Select the Bank Account: Choose the bank account from which the draw will be taken.
  3. Enter Payee Name: In the Payee field, enter the owner's name.
  4. Enter the Amount: Specify the amount being withdrawn as the owner's draw.
  5. Choose the Owner's Draw Account: In the Category field, select the "Owner's Draw" account.
  6. Save the Transaction: Click Save and close to record the owner's draw.

Step 3: Review the Transaction​

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

Best Practices for Recording Owner's Draw​

  • Maintain Accurate Records: Ensure all owner's draw transactions are recorded promptly and accurately.
  • Keep Personal and Business Finances Separate: Use a dedicated equity account for owner's draws to keep personal and business finances distinct.
  • Regularly Review Accounts: Periodically review your equity and bank accounts to ensure all transactions are correctly recorded.
  • Consult with a Professional: Work with an accountant or financial advisor to ensure proper accounting practices and compliance with tax regulations.

Conclusion​

Recording an owner's draw in QuickBooks is a straightforward process that is essential for accurate financial management. By following the steps outlined in this guide, you can effectively track owner's draw transactions in both QuickBooks Desktop and QuickBooks Online. Implementing best practices will help maintain clear and organized financial records, supporting the overall health of your business.