How do I handle "Owners Draws" or contributions?

If you are asking this question, the odds are pretty good that you have some experience with double entry accounting. "Owner Draw" is a term used to describe the withdrawal of funds from a business by a business owner. Usually, it is reflected as a withdrawal from a bank account, and categorized as a corresponding reduction in the owner's equity account.

The Simple Option

Seller Ledger was (at least initially) designed to work for businesses who file a Schedule C. The reason this distinction is important is that Schedule C filers report business income (or loss) as part of their personal tax return. And that tax form does not require the reporting of "balance sheet" account balances, like assets, liabilities, and owners equity.

Within Seller Ledger, you only need to categories those payments to yourself as "Not for Business." That tells us that the withdrawal is not a deductible expense, but for personal use. We take care of the details behind the scenes so you don't have to.

The Double Entry Option

For those of you who are comfortable with a more classic double entry accounting approach, you have a couple of options on how to handle this.

The first step is to go to the "Accounts" view in Seller Ledger and click the "Add Equity Account" button to create a new equity account. Note, you will need to give it a name other than "Owners Equity", as that is a system account we use to hide a bunch of the double entry workflow for Schedule C filers.

If the bank account you are using to contribute funds to the business or disburse owners draws is linked to Seller Ledger, you can simply categories each deposit or withdrawal as "Transfer: XXX" at the bottom of the category list (where "XXX" is the name of the new equity account you created.

If you don't have your bank account connected, then you can simply go back to that "Accounts" view and click the "Add Journal Entry" button to record the owner contributions and draws there.