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Recording Profits and Owner's Draw - Best Practices?

farmermakerfarmermaker Member Posts: 1

Hi everyone,

In the past, I recorded an owner's draw under the equity section "Owner's investment and Owner's draw". Now my equity is in the negative.

Should I be recording draws as an expense item "owner's wages" instead?

How do you all manage that? Thanks!

in Using Wave

Comments

  • remotebooksremotebooks Member Posts: 10

    It's normal for your Owner's Investment / Draw account to be negative as you pay yourself since you're pulling equity out of the business. Your net income under Retained Earnings should balance this out as long as you are not paying yourself faster than the business is generating net income. Payments to yourself can only be categorized as an expense item if you're on payroll.

    Happy number crunching!

    Sam - RemoteBooks
    hello@remotebooks.co

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