In Quickbooks, you may come across the term “Members Equity.” So, what does it mean and how do you enter it? To learn more about Members Equity, keep reading.
Overview of Members Equity
Members Equity is the total amount of money contributed by members to run a business. This differs from net income, which is the amount of profit generates from the business’s actual operations. Members Equity consists of money that’s added initially when the business is launched as well as money contributed to the business later. The total amount of these funds is collectively referred to as Members Equity.
Quickbooks will automatically calculate your Members Equity every time you run a balance sheet, similar to Retained Earnings. As a result, there’s no special register for Members Equity, nor will you see the amount listed in your chart of accounts. Of course, some businesses may have little-to-no Members Equity — and that’s okay. It’s perfectly fine for businesses to operate with minimal Members Equity, or even no Members Equity. The most important thing is that the business keeps track of its Members Equity.
On the other hand, Members Draw is the amount of money withdrawn from your business by its members. Accounting for both Members Equity and Members Draw is essential in small business accounting. If you don’t know how much money your business’s members have deposited and withdrawn, how will you know how much to pay them back? Assuming you use Quickbooks, you can easily account for Members Equity as well as Members Draws.
How to Enter Members Equity
There are several different ways to enter Members Equity into Quickbooks. The easiest method, however, is to use the “Make Deposits” option from the drop-down menu of the main screen. From here, select the company bank account to which the member made a deposit. You can then enter the name of the member who made the deposit as well as the amount of the deposit. Next, click the “From” account drop-down menu and choose the owner equity account. When you are finished, click the “Save and Close” button to record the Members Equity deposit. Sorry if you were expecting more, but that’s all it takes to enter Members Equity into Quickbooks!
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