 Zero Accounting Software 2023, Enter Transaction for Owner Withdrawal or Personal Payment Using Bank Feeds. Get ready to become an Accountant Hero with Zero 2023. Here we are in our Custom Zero homepage. Going into the company file we set up in a prior presentation. The Bank Feed file. Duplicating some tabs to put reports in like we do every time. Right-clicking the tab up top so we can duplicate it. Then we're going to right-click the tab again and duplicate it again. Let's go back to the tab to the middle. Accounting drop down. We want to open up the balance sheet report. Then I'm going to tab to the right. Accounting drop down again. This time opening the income statement or profit and loss report. Changing the date range on the income statement to bring it back to 2022 because that's the period that we have our bank feeds in. So January and December of 2022. Alright, running that. Let's go back to the first tab now. Open up our bank feeds which is under the accounting drop down. We're in the bank accounts. We've connected or uploaded information for our checking account. Manage the account. We're going to go into the transactions and then I'm going to go into the reconcile. We have been constructing our books as much as we can directly from the bank feeds. That means for the most part when we have decreases to the checking account then the other side we're going to record as they come through our bank feeds. Imagining we have an electronic transfer kind of system so that we have the information we need to automate our accounting system. And the other side usually is going to go to an expense. The most common reoccurring transactions being like the telephone bill, the utility bill, the gas bill which we can easily automate. However, there are some situations where if you have a decrease to the checking account you need to be careful to make sure that you properly categorize it instead of just having it lumped in to an expense. So some common examples of that would be you're pulling money out for example for a draw. So if you pull money out for a draw meaning you're taking it out for personal use we want to make sure that we don't record that as an expense because if we do we will be overstating these expenses. We will be understating the net income. Now if you're doing taxes in the United States you might say well that's good for taxes because my net income is going down which means I pay less tax. But obviously you can't legally do that so you'd be miscategorizing your draws as expenses and if you get audited and whatnot you're going to be in trouble for doing that. So what do we want to do on a proper method? When we take money out for a draw that should go on the balance sheet. So what should happen? We're going to see something come out of the checking account which is a draw. The checking account is going to go down and the other side which is a liability right now because we don't have any, we haven't put any deposits in. And the other side is going to go to equity. Now notice the equity accounts often confusing to people partially because the equity account has different names when you're talking about different types of organizations. But the total equity is basically the same in concept. So in other words if you're a sole proprietor, one owner of the corporation, when you pull money out of the business you're going to call it a draw normally. Now you could just record it to the retained earnings or the capital account but oftentimes people like to break out in their own account the draws, the money that we are taking out of the business. If it was a corporation we would record it. It's the same kind of concept but we would record it as dividends. And the major difference between those two things is of course if you're a sole proprietor what's going to happen? You're going to generate revenue. As you generate revenue your assets are going to go up. Hopefully your cash goes up and you can either invest that back in the business buying more equipment or you can take it out of the business for personal use in the form of a draw. And you can decide when you want to take money out of course because it's your business if it's a sole proprietor. If it's a corporation however it's a separate legal entity which has its own corporate structure which is similar to a government structure. So now you've got to have votes to determine who's going to be able to take a draw out and the draws are going to be allocated not to an individual but per share. So that means you have to come up with how much it's going to go to the owners, the shareholders on a per share basis which means you've got to do some bureaucratic kind of calculations there typically to figure out what draws are going to be taken out and then all the draws are going to be taken out and allocated based on the number of shares. If you have a partnership then you might have multiple partners who are similar to a sole proprietor and they have more leeway to take out whatever draws they want and you have to actually track those separate partnership equity accounts to manage their equity balances and possibly have a separate draws account for each partnership. So partnerships in some ways are actually more complex than a corporation because the goal of a corporation is to be able to scale without being complex because of that deviation or breaking out of the corporate stocks. Alright now from a bookkeeping standpoint then anytime something is spent for the personal use you would like to take it out as a draw would be the best way to do it and then and then record it possibly as a personal expense possibly in another zero accounting software if you want to track your personal expenses in zero as well because we would like to have a separation between the business and the personal. But sometimes that doesn't happen sometimes people just spend money for personal stuff out of the business account. If someone spent money for personal stuff out of the business account then you could just pick that up and say OK if you spent money on Disneyland or something. I'm not going to record it as Disneyland expense but instead I'm going to record it as a draw. So it's not the end of the world if that happens it's not like you can't you can't account for that. However it's more difficult to account for that especially if your bookkeeper is not the actual owner of the business because it's going to be difficult to determine if you're just spending money out of one account what stuff is business and which stuff is personal. But you could kind of break that out if you if you wanted to. And also if you wanted to do account categories you might be able to have an income statement that's broken out that that be able to break out your business and personal allowing you for small businesses sole proprietorship. For example to possibly have an income statement which would be what's necessary to create their tax returns on the schedule C with with just one zero account and be able to track your personal stuff in there as well. Although that's not you know what you really want to do for a full service accounting system because you're kind of because it's still kind of mixing things up on the balance sheet. But it's kind of not it's could be a system that that works so you have that general option as well. All right so let's go back on over. Let's go to the first tab and set up a draws account or see if we have a draws account. So I'm going to go to the accounting drop down. We're going to go into the chart of accounts and the draws account is going to be an equity account. So if I go into the equity accounts down here we've got retained earnings let's add another account. Let's call it let's call it three eight zero zero or something and call it draws. So I'm going to say add an account three eight zero zero. It's going to be an equity type of account equity and I'm going to call it draws. You could call it withdrawals draws you know you might have multiple draws for different capital accounts. If it was a corporation it would be called dividends. We'll save it there. All right let's go back into our bank feed so that draws account by the way is right there. So OK back into our accounting drop down bank accounts back into our transactions for our bank account here and reconcile. And I'm going to find I'm going to find one that we can work with here. Now let's use this one. So this one looks like it's a transfer but we're going to we're going to pretend that this seventy five dollars was pulled out as a draw. So the owner pulled the money out as a draw.