How to Record Owner's Draw in QuickBooks Online

Operating a small business encompasses a wide range of financial tasks, one of the most important being the accurate record-keeping of the owner's withdrawals from the company, also known as 'owner's draws.' These withdrawals are tracked meticulously for precise financial records, understanding of cash flow, and effective decision-making. However, this process can be somewhat intricate for those not accustomed to it, and any mistakes can lead to confusion or inaccuracies in your financial reports. 

Fortunately, QuickBooks Online provides an easy-to-use solution for managing this task. This guide will offer step-by-step instructions for recording an owner's draw in QuickBooks Online, thus enabling you to maintain accurate financial records for your business. This guide is a valuable resource for seasoned business owners and those just starting their entrepreneurial journey.

Step 1: Create an Owner's Draw Account

1. Click on the settings gear icon, and select 'Chart of Accounts.'

2. Click the 'New' button in the top right corner to create a new account.

3. In the 'Account Type' drop-down menu, select 'Equity.'

4. Navigate to the 'Detail Type' drop-down menu, and select 'Owner's Equity' or 'Partner's Equity' as applicable.

5. Name the account 'Owner's Draw' or something similar that fits your preference.

6. Click 'Save and Close' to create the account.

CTA-Banner-1

Step 2: Record an Owner's Draw

1. On the QuickBooks Online dashboard, navigate to the 'New' button (+) and select 'Cheque' under the 'Vendors' column.

2. Select the account to withdraw funds in the 'Bank Account' field.

3. Input the date and the cheque number, if applicable.

4. Enter the owner's name in the 'Pay to the Order of' field.

5. In the 'Category' section, select the 'Owner's Draw' account you created earlier.

6. Enter the amount of the draw in the 'Amount' field.

7. Click 'Save and Close' to record the transaction.

Step 3: Review Your Owner's Draw Account

1. Navigate to the ‘Accounting’ menu and select the ‘Chart of Accounts’ option.

2. Find the 'Owner's Draw' account and click 'View Register' for the transaction history.

3. The owner's draw you recorded should be visible in the register, and the account balance will reflect the total of all recorded draws.

With these steps, you can confidently record an owner's draw in QuickBooks Online. Regularly documenting and reviewing these transactions ensures you have an accurate record of the money withdrawn from the business for personal use. 

Frequently Asked Questions

How do I record the owner's draw in QuickBooks Online?

To record the owner's draw in QuickBooks Online, follow these steps:

1. Click the '+ New' button on the left-hand menu.

2. Under 'Other,' select 'Transfer.'

3. Select the bank account used for the owner’s withdrawal.

4. Select the owner's equity account in the 'Transfer Funds From' field.

5. Enter the amount of the draw as a negative value.

6. Add a memo or note if necessary.

7. Click 'Save and Close' to record the owner's draw transaction.

Can I record the owner's draw directly from the bank feed in QuickBooks Online?

Yes, you can record the owner's draw directly from the bank feed in QuickBooks Online. Here's how:

1. Navigate to the 'Banking' menu and select 'Banking.'

2. Choose the bank account where the owner's draw transaction appears.

3. Locate the owner's draw transaction in the bank feed.

4. Assign the transaction to the owner's equity account.

5. Save the transaction to record the owner's draw.

Do I need to create a separate account for the owner's draw in QuickBooks Online?

A separate account, such as an owner's equity or drawings account, is recommended to track the owner's draw transactions in QuickBooks Online. Having a dedicated account allows for better organization and reporting on the withdrawals made by the owner.

How can I track multiple owner's draw transactions for different owners/partners in QuickBooks Online?

In QuickBooks Online, you can create individual equity or drawings accounts for each individual to track multiple owner's draw transactions for different owners or partners. Assign each owner's draw transaction to their respective account to track and report on the draws made by each owner separately.

Are owner's draw transactions automatically categorized in QuickBooks Online?

By default, QuickBooks Online does not automatically categorize owner's draw transactions. When recording the owner's draw transaction, you must manually assign the appropriate account (e.g., owner's equity or drawings account). This action ensures that the draw is categorized correctly for tracking and reporting purposes.