[GNC] Owner Contributions & Distributions
Christian Lynbech
clynbech at gmail.com
Sat Jan 18 10:40:31 EST 2020
For what it is worth, but for single person company in Denmark, there is a distinction between the result of the company (income - expenses) and money you put into or take out of the company (which relate to equity, as others have pointed out).
When I started my company, I moved some money from my personal bank account to my company bank account. The transaction in the company books then involves the bank account and the equity account, increasing both.
Tax-wise, the distinction is that money that is earned in the company should be taxed, money added to equity is not taxed (since it has already been taxed once, when it was payed to me as salary).
Disclaimer: I am not an accountant and is still trying to learn about tHis stuff.
/Christian
> Den 18. jan. 2020 kl. 01.30 skrev Stephen M. Butler <kg7je at arrl.net>:
>
> I do both.
>
> I have a sole proprietorship that shares the same books with my personal
> activities. At least in this state (Washington, USA), it is just me
> doing business using a trade name. But, the trade name and I are the
> same legal entity. In that case I just opened another checking account
> at my credit union that is accessed via the same login as my other
> personal accounts. In GnC, I just set that up as another checking
> account under the same parent asset account as my other accounts
> (checking, savings, money market, etc). So, I can just move money
> between them and all is good as long as I make the same transfer in GnC.
>
> I also have an LLC that my wife co-owns with her business associate.
> That has it's own set up books. In my personal books I set that up as
> an Asset account to which I add money as needed. When the time comes
> I'll be able to draw money out of that asset. On the LLC set of books
> my accounts show up in their Equity as Ownership entries. When they pay
> me they have to decide if they are reimbursing me for some reimbursable
> expense, paying me for some work I did, or paying dividends. That
> affects how the LLC books enter the transactions. Likewise, in my books
> I have to make similar entries (reimbursable expenses are booked on my
> side as an Asset:Reimbursable (for one side of the split). When I get
> paid it offsets that value (returns it toward zero) transferring that
> asset to Checking (if I deposited it). Payment for work done simply
> becomes an income account with the other side going to my checking (just
> as for any other work I do). Dividends -- well, they haven't paid any
> yet! So I haven't had to figure that one out. But it should be like
> dividends from any other stock (or CD or interest bearing account) that
> you own.
>
> Hope this helps.
> --Steve
>
>> On 1/17/20 2:40 PM, Don Ireland wrote:
>> I wasn't planning to as I think that would really really complicate
>> the books.
>>
>> On January 17, 2020 4:26:06 PM CST, "Stephen M. Butler"
>> <kg7je at arrl.net> wrote:
>>
>> 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
>>
>> ------------------------------------------------------------------------
>>
>>
>>
>> Don Ireland
>
>
> --
> Stephen M Butler, PMP, PSM
> Stephen.M.Butler51 at gmail.com
> kg7je at arrl.net
> 253-350-0166
> -------------------------------------------
> GnuPG Fingerprint: 8A25 9726 D439 758D D846 E5D4 282A 5477 0385 81D8
>
>
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