QuickBooks makes it easy for the business to manage their accounts in a more organized and quick manner. Moreover, it offers a host of features, and one of them is the attribute to ‘track owner’s equity’.
Owner’s equity is basically the owner’s stake in the business in terms of the assets. It signifies the worth of the company’s assets subtracting the worth of its liabilities. It is a part of the three key components of a sole proprietorship balance sheet. The sheet consists of details of the assets, liabilities, and net worth (equity) at a particular period of time. In simple words, owner’s equity is augmented when a company earns greater than the overheads and it lessens if the business spends more money that it earns. However, the main aim of every business owner is to function profitably.
Also, owner’s Equity is the sum of an early investment which is basically used to commence the tasks of a business, or to acquire assets and inventory for the industry. It is significant to determine owner’s equity and QuickBooks 2017 will help you track your owner’s equity, if you have just commenced your business operations.
However, you might have to take a different strategy (depending of your business) to determine equity status.
In case of a sole proprietorship
With the help of just one account, named as the Opening BAL Equity, the one which QuickBooks sets up for you, is enough to trace the worth which you’ve invested in the business. You may even choose to track the money or assets you have withdrawn from the business.
In case of a partnership firm
You would have to create separate three accounts for every partner in the business. One account will contain the details of the contributed capital, one will contain the draws, and the third one will consist of the partner’s share. Simply, the amount withdrawn can be tracked from the draws account.
In case of a corporation
A plenty of accounts are required to track the owner’s equity in a corporation: Here are some of them:
- A capital stock par value account
- A retained earnings account
- A paid-in capital in excess of par value account
- A dividends paid account
Here are the most common steps to generate certain things in the equity section in QuickBooks:
- Select ‘Company’, and click on the option that says ‘Make Journal Entries’ the accounting tool.
- Click on the option that reads, ‘Owner’s Equity’
- Key in the location where you have deposited any concomitant funds under the “Debit” section.
- Key in the corresponding credit under the “Credit” section.
- Now just click on “List” and choose the “Chart of Accounts.
- Together Press “Ctrl” and “N” to generate a “Long Term Liability” account.
- Click on “Type” and select the “Long Term Liability.”
- Press “Enter Opening Balance”
- Now, here, write down the date and the value of any loans that you may have
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