How To Set Up and Use an Owner’s Draw
An owner’s draw is a financial account in Quickbooks that’s used to track payments made to the business owner (hence the name). Every business owner must pay him or herself sooner or later. By recording these transactions in an owner’s draw, you’ll have an easier time keeping track of your business’s finances. If you’re interested in learning more about owner’s draw and how to set them within Quickbooks, keep reading.
Setting Up an Owner’s Draw Account
To create an owner’s draw, log into your Quickbooks account and access Lists > Chart of Accounts. At the bottom left-hand side of the screen, you’ll see a menu with “Accounts.” Click this link followed by “New.” Next, choose Equity > Continue.
You’ll be asked several questions regarding the new account, including what you’d like to name it (optional) and a description. Assuming you have just a single owner’s draw account, an easy name to remember is “Owner’s Draw.” If you have multiple owner’s draw accounts, however, you may want to include the name of the respective owner/payee in the name field for each account. When you are finished choosing a name and description, click Save & Close to complete the setup. Sorry if you were expecting more, but that’s all it takes to set up an owner’s draw account!
Writing Checks From an Owner’s Draw Account
Making payments from an owner’s draw account is a relatively simple and straightforward process. To write a check from the owner’s draw account, choose Banking > Write Checks, at which point a new window should appear asking you for more information. Under the “Pay to the order of” section, enter the business owner’s name to whom you wish to send the check, and the dollar amount of the payment. Last but not least, assign the amount of the check to the owner’s draw account. Click Save & Close to write the check and complete the process.
Remember, the owner’s draw account should only be used when making payments to the respective business owner. Using this account for your standard payroll isn’t recommended.
Were you able to set up an owner’s draw by following the steps outlined here? Let us know in the comments section below!