Owner's equity - when to update it?
Keegan
Member Posts: 1
I'm new to accounting, and have a small two-member LLC partnership started in 2021. Under "Equity", I have four accounts: Partner 1 & 2 "Investment/Drawings" and Partner 1 & 2 "Owner's Equity". I understand that the Investment/Drawings accounts are supposed to be used for contributions to the business, business expenses paid out of personal funds, and draws from the business, while Owner's Equity" is supposed to be for all other equity transactions (like retained earnings and profit/loss for the year?). Here's my questions:
1. The original, wave created "Owner's Equity" account's name can't be changed. I'd rather it say "Partner 1 Equity" and "Partner 2 Equity." But right now it says "Partner 2 Equity" and "Owner's Equity". Why can't I change the name of this account?
2. When (if ever) should I update the "Owner's Equity" accounts to reflect recent net profit/loss? I see that Wave does this automatically in the Balance Sheet report under "Retained Earnings", but I don't see a way to split these out between the two partners. I know that the 1065 just requires the total equity, but our partnership agreement states that we should "establish and maintain a Capital Account for each Member...increased by the Member's share of profits and decreased by the Member's share of losses". How do I do this in wave without breaking the other "Retained Earnings" logic?
3. What is best practice for how often to update capital (equity) accounts? Monthly? Annually?
Thank you!