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Old 02-17-2010, 04:10 PM
DianaC DianaC is offline
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Creating an Owner Equity Report...

Using QB 2009 Pro

Working for a small company that started last year. The owner does not take a regular salary, instead relying on draws when needed. Early on he made quite a bit of investment from personal CCs, lines of credit, etc into the company. Please bear with me as I try to explain what's going on, in sufficient detail to get help.

We need to have an accurate report for his records of what he paid himself for the last fiscal year (there are other factors to this but, this is a big one).

We have put his personal CC that has been used primarily for business into QB as a biz liability, all personal transactions on that account have been categorized as Draws. Payments from his personal bank account are categorized as Investments.

Now the first thing we noticed (and were assured by a QB Certified Consultant and a CPA) is that the CC debt appears as a positive number. I believe this is causing a lot of the issues we're seeing with the Owner Equity Report I'm trying to create, basically the owner laughed and said I know I didn't live on that little last year.

The report settings are: Date Range (Last Fiscal Year); Report Basis (Cash); Total by (Total only); Filters (Account: Owner Equity; No Split detail);

Now on this report what seems to be happening is when he transferred funds from his CC to the bank account, the CC transaction Shows as a negative Investment and then the checking deposit shows as a positive investment... effectively canceling each other out. This can't be right, since there should still be a $6k investment...right?

Input? Questions? I know I'm not explaining it fully, but the more in detail I try to go, the more confuse I become.

Diana
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  #2  
Old 02-17-2010, 07:29 PM
karlsexton karlsexton is offline
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Hi Diana,

This is actually a very common issue. Owner capital & personal transactions can be a huge headache if not clearly defined.

OK, let me see if I have this right: his personal CC is on the company books; you are entering each cc charge to this card: expensing business activity and charging any personal activity to an Equity account; then you are paying off the card by company check. That all sounds fine.

Any checks he makes out to the company to repay personal activity you are NOT applying to the cc account but are instead crediting Investment. OK there too.

The only reason the cc account could be a negative liability that I can think of at first blush is if you have entered some of his charges on the card somehow differently?

My recomendation is to create a 2 sub-accounts to Draws: 1) "Clearing- Personal Charges" and code his personal charges & his repayment checks to this account. 2) "Direct Draws" and code true draws to this account. To make clean for end of a reporting period, you can record a reversing entry moving balances into the Draws main account.

Does any of this help?
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  #3  
Old 02-26-2010, 02:55 PM
DianaC DianaC is offline
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For anyone that might stumble upon this looking for help on their own issue, here's the resolution for my issue.

Basically everything was entered correctly except there was one transaction that had been entered by the previous bookkeeper before we decided to put the personal CC into the business (since it was all biz expenses); I didn't know about that previous entry (though in retrospect should have thought about it), so that was making the report look weird/incorrect. I modified the CC entry to be a Transfer (vs Draw) and then reconciled it into the checking records.

Instead of using the report I was using (far too detailed) we opted to use a Modified Balance Sheet report.

Hope this helps someone else!
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