[GNC] Owner Contributions & Distributions

Fri Jan 17 17:26:06 EST 2020

Are you mixing your personal and business in the same GnuCash file?

On 1/17/20 2:07 PM, Don Ireland wrote:
> What I was referring to is the checking account I use for my business. When I make what the bank sees as a deposit, I need to account for it in my books.
>
> My books includes an asset account called Business Checking.  Wouldn't that deposit be considered a credit?  Based on what you've described, it sounds like you'd treat it as a debit.
>
> I need to account for moving money from my personal checking account into the business account.  I entered it in to my personal check register.  Now I need to separately account for it in the business books.
>
> On January 17, 2020 3:50:03 PM CST, Adrien Monteleone <adrien.monteleone at lusfiber.net> wrote:
>> Speak to a local CPA for details for your situation and jurisdiction,
>> but from what you can find in a basic accounting text book, generally
>> both contributions (capital investments) and distributions (draws) are
>> equity accounts.
>>
>> The tree would look something like this:
>>
>> Equity
>> |_Opening Balances (already exists)
>>
>> |_Owner’s Equity
>>  |_Investments
>>    |_Capital Investments
>>    |_Reimbursements
>>  |_Earnings
>>    |_Dividendscurl 'https://tangerine-tulip-8sj7.squarespace.com/api/commerce/orders/export?orderStates=PENDING%2CFULFILLED%2CCANCELLED&productType=&productId=&includeProductForm=false&orderSubmittedOnMin=2018-11-23T19%3A14%3A03.056Z&orderSubmittedOnMax=2020-01-18T07%3A59%3A59.999Z' -H 'User-Agent: Mozilla/5.0 (X11; Ubuntu; Linux x86_64; rv:72.0) Gecko/20100101 Firefox/72.0' -H 'Accept: text/html,application/xhtml+xml,application/xml;q=0.9,image/webp,*/*;q=0.8' -H 'Accept-Language: en-US,en;q=0.5' --compressed -H 'DNT: 1' -H 'Connection: keep-alive' -H 'Referer: https://tangerine-tulip-8sj7.squarespace.com/config/commerce/orders' -H 'Cookie: SS_MID=8eaefbac-45bf-4f31-8e67-ecc1c580eee1; IR_gbd=squarespace.com; IR_9084=1579299517019%7Cc-13076%7C1579299109123%7C%7C; IR_PI=5b9f1e10-3976-11ea-b100-061034f1b114%7C1579385509123; SS_ANALYTICS_ID=3ea228cc-4cf5-459f-9904-1d3b25f624e4; __zlcmid=wIiqRZHeptxSLP; SS_SESSION_ID=60b42e4b-16ea-40bb-b7a1-ca6b35d6854b; SS_MATTR=eyJ2IjoyLCJhIjpbImRpcmVjdCIsIiIsIiIsIiIsIiJdLCJkIjoiMjAyMC0wMS0xNyAyMjoxNjo1Ni45MDMifQ==; _gcl_au=1.1.630127523.1579299418; crumb=saTUnBhE+Dsv6Ojy4pfcPfWTsV3cFqNAmWFw3A4aX5OJ; member-session=1|mGHszCC84SpEsx9ZVB6XLEQ53+ZaAU0FoudlR6i7A1tG|syPynu+Bf+W893cf1LdoKDTxzfTAz9XXOi0+MUG4Z6Y=; ss_lastid=eyJpZGVudGlmaWVyIjoidGFuZ2VyaW5lLXR1bGlwLThzajcifQ%3D%3D' -H 'Upgrade-Insecure-Requests: 1' -H 'TE: Trailers'
>>  |_Draws
>>    |_Owner’s Draws
>>
>> |_Retained Earnings (already exists, either actually, or virtually)
>>
>> (there might be other types of Draws or Earnings which is why I show
>> those parent accounts with a specific child. You could just leave the
>> child accounts off if you don’t have need for them, and refactor later
>> if you do. Other types of Investments might also include land,
>> buildings, equipment, product, etc.)
>>
>> All of these accounts should be created as type ‘Equity’
>>
>>
>> A sample transaction when you make contributions to your business would
>> be:
>>
>> Dr. Cash/Checking, etc.
>> Cr. Equity:Owner’s Equity:Investments:Capital Investments
>>
>>
>> A sample transaction when you take a draw would be:
>>
>> Dr. Equity:Owner’s Equity:Draws:Owner’s Draws
>> Cr. Cash/Checking, etc.
>> curl 'https://tangerine-tulip-8sj7.squarespace.com/api/commerce/orders/export?orderStates=PENDING%2CFULFILLED%2CCANCELLED&productType=&productId=&includeProductForm=false&orderSubmittedOnMin=2018-11-23T19%3A14%3A03.056Z&orderSubmittedOnMax=2020-01-18T07%3A59%3A59.999Z' -H 'User-Agent: Mozilla/5.0 (X11; Ubuntu; Linux x86_64; rv:72.0) Gecko/20100101 Firefox/72.0' -H 'Accept: text/html,application/xhtml+xml,application/xml;q=0.9,image/webp,*/*;q=0.8' -H 'Accept-Language: en-US,en;q=0.5' --compressed -H 'DNT: 1' -H 'Connection: keep-alive' -H 'Referer: https://tangerine-tulip-8sj7.squarespace.com/config/commerce/orders' -H 'Cookie: SS_MID=8eaefbac-45bf-4f31-8e67-ecc1c580eee1; IR_gbd=squarespace.com; IR_9084=1579299517019%7Cc-13076%7C1579299109123%7C%7C; IR_PI=5b9f1e10-3976-11ea-b100-061034f1b114%7C1579385509123; SS_ANALYTICS_ID=3ea228cc-4cf5-459f-9904-1d3b25f624e4; __zlcmid=wIiqRZHeptxSLP; SS_SESSION_ID=60b42e4b-16ea-40bb-b7a1-ca6b35d6854b; SS_MATTR=eyJ2IjoyLCJhIjpbImRpcmVjdCIsIiIsIiIsIiIsIiJdLCJkIjoiMjAyMC0wMS0xNyAyMjoxNjo1Ni45MDMifQ==; _gcl_au=1.1.630127523.1579299418; crumb=saTUnBhE+Dsv6Ojy4pfcPfWTsV3cFqNAmWFw3A4aX5OJ; member-session=1|mGHszCC84SpEsx9ZVB6XLEQ53+ZaAU0FoudlR6i7A1tG|syPynu+Bf+W893cf1LdoKDTxzfTAz9XXOi0+MUG4Z6Y=; ss_lastid=eyJpZGVudGlmaWVyIjoidGFuZ2VyaW5lLXR1bGlwLThzajcifQ%3D%3D' -H 'Upgrade-Insecure-Requests: 1' -H 'TE: Trailers'
>>
>> If this is a distribution of profits, (and not just a draw) then you’d
>> use the Dividends account:
>>
>> Dr. Equity:Owner’s Equity:Earnings:Dividends
>> Cr. Cash/Checking, etc.
>>
>>
>> This will keep all of these transactions in the Equity part of the
>> tree. They will not affect Income or Expenses, but they will affect
>> assets as money is put into the business or taken out.
>>
>> Note that Capital Investments don’t decrease as you take Draws or
>> Dividends, and nothing ever decreases the Draws or Dividends, but all
>> three affect the parent account "Owner’s Equity” balance appropriately.
>> The Earnings & Draws parts of the tree will generally have ’positive’
>> sign balances if you aren’t reverse balancing accounts, or ’negative’
>> sign balances if you are. (for all credit accounts) This is because
>> those two accounts are ‘contra’ accounts from normal Equity type
>> accounts, meaning they will have the opposite balance expected for
>> Equity, that is, a debit balance is normal, instead of a credit balance
>> as normal.
>>
>> But certainly, how this is setup or done is entirely dependent on your
>> exact form of your business and legal situation and requirements, which
>> is why you should really, really, really get a local CPAs advice.
>>
>> Regards,
>> Adrien
>>
>> p.s. - though it may not matter since you might not be using such a
>> transaction, your below example of depositing money into a checking
>> account wouldn’t be a credit to it. As you are increasing an asset, it
>> would be a debit for that side of the transaction.
>>
>>
>>> On Jan 17, 2020 w3d17, at 3:17 PM, Don Ireland
>> <gnuCash at donireland.com> wrote:
>>> I'm having trouble figuring out the best way to handle owner
>> contributions and distributions in gnucash.  I understand them in
>> concept but I'm just confused as to how the accounts get set up.
>>> My 1st thought was to create an asset account called Owner
>> Contributions and another called Distributions.  But then when when I
>> take Distributions, unless I take the funds from this contributions
>> account, it'll just continue to grow.  
>>> Plus when I credit this account but deposit the money in the checking
>> account, gnucash would see both as credits.  So then I thought maybe
>> it's a liability account but that still leaves the question as to
>> separating the contributions and distributions. 
>>> Do I create one account called Contributions & Distributions and
>> credit/debit this single account?  Is it a liability account?
>>> Don Ireland
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>> https://wiki.gnucash.org/wiki/Mailing_Lists for more information.curl 'https://tangerine-tulip-8sj7.squarespace.com/api/commerce/orders/export?orderStates=PENDING%2CFULFILLED%2CCANCELLED&productType=&productId=&includeProductForm=false&orderSubmittedOnMin=2018-11-23T19%3A14%3A03.056Z&orderSubmittedOnMax=2020-01-18T07%3A59%3A59.999Z' -H 'User-Agent: Mozilla/5.0 (X11; Ubuntu; Linux x86_64; rv:72.0) Gecko/20100101 Firefox/72.0' -H 'Accept: text/html,application/xhtml+xml,application/xml;q=0.9,image/webp,*/*;q=0.8' -H 'Accept-Language: en-US,en;q=0.5' --compressed -H 'DNT: 1' -H 'Connection: keep-alive' -H 'Referer: https://tangerine-tulip-8sj7.squarespace.com/config/commerce/orders' -H 'Cookie: SS_MID=8eaefbac-45bf-4f31-8e67-ecc1c580eee1; IR_gbd=squarespace.com; IR_9084=1579299517019%7Cc-13076%7C1579299109123%7C%7C; IR_PI=5b9f1e10-3976-11ea-b100-061034f1b114%7C1579385509123; SS_ANALYTICS_ID=3ea228cc-4cf5-459f-9904-1d3b25f624e4; __zlcmid=wIiqRZHeptxSLP; SS_SESSION_ID=60b42e4b-16ea-40bb-b7a1-ca6b35d6854b; SS_MATTR=eyJ2IjoyLCJhIjpbImRpcmVjdCIsIiIsIiIsIiIsIiJdLCJkIjoiMjAyMC0wMS0xNyAyMjoxNjo1Ni45MDMifQ==; _gcl_au=1.1.630127523.1579299418; crumb=saTUnBhE+Dsv6Ojy4pfcPfWTsV3cFqNAmWFw3A4aX5OJ; member-session=1|mGHszCC84SpEsx9ZVB6XLEQ53+ZaAU0FoudlR6i7A1tG|syPynu+Bf+W893cf1LdoKDTxzfTAz9XXOi0+MUG4Z6Y=; ss_lastid=eyJpZGVudGlmaWVyIjoidGFuZ2VyaW5lLXR1bGlwLThzajcifQ%3D%3D' -H 'Upgrade-Insecure-Requests: 1' -H 'TE: Trailers'
>> -----
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> Don Ireland
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> -----
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Stephen M Butler, PMP, PSM
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