Setting up Equity category for partnership + handling expenses before biz account
HCS
Member Posts: 3
Hi there,
I'm new to small business/accounting and trying to set up Wave for a Partnership my colleague and I just established. I have two questions:
1) We are going to be sharing start-up expenses 50/50. I can't figure out how I should set up the Equity accounts to reflect this. Should we each have our own "Partner Investment / Drawings" category under "Business Owner Contribution and Drawing"?
2) We had expenses before we got our business bank account up and running. I paid them on my own credit card, and then my partner reimbursed me 50%. What's the best way to record/handle these in Wave?
Thanks,
Megan
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Comments
Hi Megan,
You would set up under equity a Partner Distribution - Megan and Partner Distribution Jane Doe account. This account should be used for when you make distributions to yourselves. You can also set up under equity Partner Capital - Megan and Partner Capital Jane Doe. This account would be used to record capital contributed. To record your start up expenses that you each paid outside of the partnership you would debit the expense or asset and credit capital contribution.
Mike G, CPA
www.mgfinancial.net
Affordable Solutions for Small Business
Thanks Mike!
I gave that a try, and the confusion I'm running into is that when I have an expense (for example - $220 for a service) and try to split it 50/50 in Wave, it only lets me select a single account. Later in the receipt/transaction, I can select two categories when splitting (for example - Capital - Megan and Capital - Jane Doe) but I still have to select a single account to attribute it to.
When you say debit the expense and credit capital contribution, what is the correct way to ensure that an expense/receipt that is uploaded is split 50/50 and tracked to each of our contributions?
Sorry, not sure if what I'm describing makes sense.
Megan,
I not as verse in the receipt function of Wave. I guess I just do journal entries. So let's say for example you spent 300 on office supplies before the business started. Your partner gave you 150 to account for their share. The journal entry would be debit to office supplies 300 and a credit to owner contribution 150 to Megan and 150 to Jane
Mike G, CPA
Megan,
I'm on the East coast and checkin out for the evening. I will answer any other questions you may have in the AM.
Have a good evening.
Mike G, CPA
I have a question based on this string. So I understand how to code the split of the payments between partners, but my partner pays me monthly based on an invoice she creates on what she owes (we also split everything 50/50). What account do I credit these payments to in order to show that they offset the payments made on my side. For example, we pay our Real Estate Brokerage a monthly fee of $1375, which is invoiced directly to me. I then pay it and she provides me with an excel invoice she has created with those line items and a check and then I deposit the funds into my business account to offset what I have paid. How would I categorize that in Wave?
Hey @Home_Journey_Team , we as support agents can advise you on how to use Wave's functionality, but I'm afraid that when it comes to advising on how to account for things and which accounts to use, you'd be best reaching out to a CPA/accountant to give you the most accurate information for your bookkeeping.
Hey @Home_Journey_Team , this would be a question for an accountant. Because you're both owners of the business and there are actually tax implications to both the money spent and being paid back, I wouldn't be able to advise you on which accounts to choose. I can tell you that you should be using Journal Transactions to allot the money, but beyond that, we're getting into accountant territory where it becomes a bit more complex.