Startup questions - clearing things up

[David Harrison]

I copied the list on this as there may be others with similar questions!

On Wed, 10 Nov 2004 21:22:30 -0600, Chris Reinhart
<tufkal at granola.mine.nu> wrote:
> David Harrison wrote:

> >>2) Create a Expense account like Expenses:Personal Transfer for when I am
> >>moving money out of my business checking account to myself.
> >>
> >>
> >
> >I would keep it out of expenses.  I'm not sure what country you're in,
> >or if you are a proprietor/partner or incorporated, but here is how I
> >would do it in Canada:
> >
> >For a proprietor/partner - set up an account Equity: Draws - and post
> >the transfers there, same with transfers into the business chequing
> >account from you.
> >
> >For a corporation - set up an account Liabilities: Shareholder's loan
> >- and post the transfers there, same with transfers into the business
> >chequing account from you.
> >
> >This will keep your income statement a lot cleaner for when you go and
> >prepare taxes as there will be no personal expenses included.
> >

> Thank you so much for the help Dave.  That clears it up alot.  To clear
> it up futher I will tell you that I am a sole proprietor in the US.
> 
> So you are saying that when I need to move money from my business
> account to my personal account to say, pay my car loan, or any other
> reason I need to pay myself, I should enter the transaction from
> Assets:Checking to Equity:Draws, and if i need to move money back into
> the business checking account when I have to order products, it should
> come from Equity:Draws to Assets:Checking?  What if the situation
> arrises that I am putting money into my business checking and my
> Equity:Draw isnt enough?  Should I throw a starting balance in Equity:Draw?

Yes, any money to or from yourself should go through this account. 
Don't worry if the balance is a debit or a credit, equity accounts can
be either. It will be a debit balance if you take out more than you
put in, and a credit balance if you put in more than you take out.

> 
> And thank you very much for the Retained Earnings explanation, that is
> the one part I was really baffled about.  It is done in GNUCash
> annually, which shows why it wasnt changing for me.
> 
You're welcome

Dave