Sole Proprietor Accounting Question

by Bethany
(Virginia)

My husband and I own a small handyman and lawn care business. My husband is the sole proprietor and I take care of the finance side of things. What is the best way to handle the transfer of income from the business account into the personal account and how is it best to keep track of that in QuickBooks?


Thank you!

Bethany

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Hi Bethany!

When a sole proprietor takes money out of the business for personal needs, that is considered an equity transaction. The owner is taking a withdrawal of equity out of the business.

In your Chart of Accounts you should have an Owners Equity account. You may also have sub-accounts entitled 'Owner Contributions' and 'Owner Withdrawals'.

If you don't have these sub-accounts, that's ok, you can just use the Owner Equity account.

So, in QuickBooks, write a check out to your husband, and post it to the 'Owner Equity' account (or 'Owner Withdrawals' if you have it).

Hope that helps!

If you have any other questions, just let me know.

Thanks!
Kathy

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Oct 11, 2013
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in answer
by: Kathy


To post the internet transfer to your personal account, write a check in QuickBooks but instead of putting in a check number use "EFT" - this is in your check register. Don't use the 'transfer of funds' because that is only for transferring between 2 business accounts.

And, yes, I would advise you to use an account titled "Owner Withdrawals". Tag it as an Equity account, just remember it will have a Debit balance. It will help you keep track.

Hope that helps and let me know if you have any more questions!

Glad to help!
Kathy

Oct 11, 2013
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Internet Transfers
by: Anonymous

Hi Kathy!

I actually do have other questions:

How would I enter internet transfers from our business bank account into our personal bank account?

Would I use the "Transfer Funds" screen and use the Owner Equity account?

And would you suggest creating an "Owner Withdrawls" account even if it wouldn't be a sub-account of "Owner Equity"?

Thank you again!

Oct 08, 2013
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great!
by: Kathy

Glad I could help!

If you need anything else, just let me know. Also, if you need help with your tax return, I do provide Tax Preparation services.

Take care!
Kathy

Oct 06, 2013
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Response
by: Bethany

Hi Kathy! Thank you for responding so quickly! And your answer helped greatly! Thank you!

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