owner's equity

Draws do not affect profit. Write your cheques and charge them to the Owner's Equity account, or to a separate Draws account (Equity) if you prefer.

profit

Thanks kindly for your reply

I just thought I was missing something since the Quickbooks help said that it is based on the company profit so I thought I was doing something wrong since it didn't appear on the P and L's

Thanks for your help

Cya

Chris, sorry, I missed something in your original question - I missed that you asked about a CORPORATION, I assumed you were asking about an unincorporated business - proprietorship or partnership - because you asked about "owner's equity" and "draws". A corporation does NOT have "Draws", and its equity is commonly referred to as Shareholders' Equity rather than Owner's Equity (a minor matter of terminology and not significant, but the question of "draws" is important).

Because a corporation does not have "draws", payments to the owners (shareholders) must be designated as loans to the shareholders, payment of dividends, payment of salary or bonus, or payment of management or director's fees. Each of these has significant tax implications.

It is time to consult your accountant. Failure to understand what you are doing in this area, and to consider the tax implications, can result in very nasty tax surprises a few months or years later.

Typically, an owner ina corporation can take draws against a loans account. Frequently the shareholder/owner will have his bonuses or dividends (for a privately held corp) applied to a loans account so draws can be made against the owner's loan to the company.

-- Stephanie Serba, AICIA Partner, Durham Business Outsource Accounting and Technology