Owner's Draw setup under Equity group

DaveC49 davidcousens at bigpond.com
Mon Mar 13 05:13:05 EDT 2017


Adrien,

I'm not sure I would agree with the statement that an Equity:Owner's draw is 
a temporay account. 

Equity is normally considered a component of the "permanent accounts" in
GAAP which persist from year to year whereas Income and Expense accounts are
regarded as temporary Equity accounts, i.e. they record transactions from
the current accounting period and the balances would in the accounting
period closing procedure be transferred to something like an
Equity:RetainedEarnings account. 

I haven't had the opportunity to explore the Gnucash closing procedure in
any detail, but my guess is that the top level Income and Expense accounts
have transactions to them (or a suitable designated sub account) which sums
to them to transfer the Income -Expense balances to Equity:RetainedEarnings
but one of the developers may be able to clarify this. This leaves all the
transactions in place but sets the Income and Expense account top level
balances to 0 at the end of the accounting period

Normally one would have something like an Equity:PaidInCapital account with
the Equity:Owner'sDraw would be setup as a contra account. Both of these
accounts would be setup as child accounts of the placeholder Equity top
level account which would sum their balances to reflect the equity you hold
in the business

What this means is that to pay in capital to the business you would debit
the Asset:Bank account and credit the Equity:PaidInCapital and when you draw
money out of the business you credit Asset:Bank account and debit the
Equity:Owner'sDraw. 

David Cousens




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