Thank you very much for both of your prompt and understandably thorough replies. I believe I’m on the right track when a business has multiple partners involved in a service industry business. Just a few more questions to make sure I understand your replies.
- Our partnership agreement placed a specific dollar amount certain partners would receive bi-monthly during the course of the year as long as business was profitable. However, if it is better to use Equity Drawing, to avoid an amended partnership agreement in the future, I can use the Equity Drawing Account. This might be a better alternative if the business profits cannot sustain the Guaranteed Payments.
- After I make the partner vendors inactive, can I re-categorize the expenses already listed in the vendor account, so they are reflected/moved to the correct account (i.e., Equity Drawing)?
- Should I edit and re-categorize items in the Banking Register so they match up or will QBO perform that action automatically?
- Create the following for Each Partner. Afterwards, am I correct in understanding:
- Equity (Never post to this account)
- Drawing (withdrawals/payments made to partner)
- Equity Investment – record value you put into the business here.
This will remain zero until the end of the year and is only used if personal investment funds are deposited.
- At the end of the year will Investment = % of Partner’s Share of Net Income, if no personal money was invested throughout the year? And do I manually enter a $ amount based on the partner’s share of Net Income?
I truly appreciate the time you have taken to assist me in obtaining a clear understanding of Equity Accounts that affect multiple partners in a partnership. I never realized the importance or impact they have on the correct reporting procedures of partnership activities (draws, disbursements/reimbursements, and if investments are deposited).
