Where should the 'Owner Investment / Drawings account' reside?

generalinqgeneralinq Member Posts: 9

Hi

I have a few expenses that I still pay for myself. So I create journal entries for each expense (debiting the expense account and crediting the following equity account: Owner Investment / Drawing account). Here is what I am not 100% sure about:

The Owner Investment / Drawing account equity account is under Retained Earnings, instead of under 'Business Owner Contribution and Drawings'. Is this correct? (the only account I have in the Business Owner Cont/Drawings is the Common Shares account. I suppose at the end of the day it doesn't matter since they are both 'Equity' accounts. However, the reason for my ask is because when submitting my taxes online, the only area in which I transfer this amount to is on line '3540 Contributed and other surplus' (cdn corp), which is not calculated as part of the Retained Earnings/Deficit.

Thanks.

edited February 25, 2020 in Using Wave

Comments

  • EmmaPEmmaP Administrator Posts: 639 admin

    Hi @generalinq! Thanks for reaching out! What business type does your business fall under? Depending on the type of business (Corporation, Sole Prop etc) it can change the Equity accounts. If you are running a corporation it can get a bit more complicated. If a corporate shareholder takes money out or uses corporate funds for personal expenses, it could be considered a dividend payment, a 'shareholder distribution' (for example in an S-Corp in the US), or a loan to the shareholder. In Canada it could be bookkept as a 'dividend'. To do this, create a new Equity account in under 'Business Owner Contribution & Draw' called 'dividends paid. In this case, should you need further clarification, I'd recommend reaching out to your accountant/bookkeeper for some sound professional advice on the matter, just for good measure!

  • generalinqgeneralinq Member Posts: 9
    @EmmaP thanks for the response. I have a Canadian corporation. No I wasn’t taking money out, I was investing money into the business as stated to pay for expenses from my personal account. Not the other way around. Regardless, perhaps I should have been more clear with my question.

    Why does Wave put the Owner investment/drawings account in the Shareholder equity section rather than the Business Owner Contribution section? What’s the difference?
  • AlexLAlexL Administrator Posts: 1,948 admin

    Hey @generalinq , can you send me a screenshot of where you see the Owner Investment/Drawing account showing up in a Shareholder equity section rather than the business owner contribution section?

    Let me know!

  • EmmaPEmmaP Administrator Posts: 639 admin

    Hey @generalinq! Thanks for sharing that. We would generally expect the owner investment/drawings account to be in the "Business owner contribution and drawing" category. In this case, we are not sure why it has been placed under Retained Earnings. It does look like a Wave system generated account. Are you able to edit the account to move it to the other equity category?

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