How to Set up Owners Equity Account in QuickBooks?

July 26, 2021

Set up Owners Equity Account in QuickBooks

Owner’s equity can also be referred to as net worth or total assets, equity. In other terms, it is the remaining amount of ownership you already have in your business after deducting all your liabilities and expenses from your assets. This amount shows you how much of your capital business is available for further activities like investing or growth. It will let you evaluate your growth in financial terms. Learn how to set up owners equity account in QuickBooks.

Owner’s equity is the amount that represents the owner’s investment in the business. It excludes the owner’s withdrawal amounts from the business. It entails the net income since the business began. Owner’s equity is viewed as a continuing claim on the assets of business. It will also decrease if you have expenses and losses in the business. In general terms, it is considered to be the asset of business which excludes any loss or expenses. The number of investments the company fetches gets calculated and how much each investor withdraws from the equity funds is also the part of it.

For calculating your equity balance, there is a separate account in QuickBooks platform. A simple account setup will ensure that you hold all the information about your available equity balance. For this, you can use the single account set up for you by QuickBooks. In order to track the money you withdraw from your remaining balance in the business, you can choose to set up and use it as a new owner’s equity account. In technical terms it is called the Owner’s Draws. This account consists of subsections that will include the three aspects of the equity funds which are as follows:

  • Opening balance of the equity in your business.
  • Amount of the invested funds that are invested by the co-owners.
  • The funds which are withdrawn out from the account.

Types of Owner’s Equity Account:

When you are all set to create your equity account in QuickBooks, you would like to know about all the available options you have to choose from. Here are the types of Equity account:

Preferred Stock: This type of Stock comprises a set of corporate shares that have specific rights that are not attainable to regular shareholders.

Common Stock: This is known to be a security term which is used in almost every US Company. This is also known as regular stockholders who will elect the board of directors through this.

Retained Earnings: Retained earnings are best defined as the amount of profits gained through the business operations and investment. This benefit is also used in the balance sheet and cash flow statement.

Additional paid-in Capital: Any cash inflow that is deposited through the investors is known as Additional paid-in capital. It can also be considered as an excess amount that outstrips the par value.

Treasury Stock: This amount is a certain pile of money that business organizations use to maintain their treasury. The treasury stock value can also be of a negative value.

When you set up an opening balance equity account for you with QuickBooks, you can rest assured to track the owner’s equity in a sole ownership. This particular equity account in QuickBooks can records the following type of transactions:

  • The ending statement of the bank balance transaction of a new bank account.
  • The starting balances for other Balance Sheet accounts that are created in the Add New Account dialogue box.
  • At the time of setup of New Customers or Vendors, the opening balance is recorded.
  • Opening accounts payable transactions on accrual basis as of the start date.

Setup Process:

If you’re operating as the sole owner, then you only need to set up just one equity account. Here’s how:

  • Login to the QuickBooks account.
  • Click on the Settings (gear icon) tab, then click on Chart of Accounts.
  • Select the New tab action.
  • Then you choose the account tab and select Account Type.
  • A drop-down will appear and you need to select Owner’s equity.
  • Click on the Detail Type and another drop-down will appear.
  • Choose Owner’s Equity or Partner’s Equity depending on your business requirements.
  • Hit the Save and Close button.

Once you complete the setup steps, your equity calculations and record keeping will become easy and very less time consuming. Accuracy is another factor to look forward to.

There are some frequently asked questions related to this concept which may boggle your mind. Do not worry at all, we have few of the questions enlisted here:

How to Set up Owners Equity Account in QuickBooks Online?

As there are is another version of QuickBooks platform which is QuickBooks online, here’s how you can record yours’ or owner’s contribution:

  • Login to the QuickBooks account.
  • Click on the Accounting tab.
  • Select the Chart of Accounts and click the New tab action.
  • Under the Account Type section, choose the Equity.
  • Click on Owner’s Equity from the Detail Type field.
  • Add Owner’s Contribution in the Name field.
  • Enter the contribution amount in the Balance field.

Steps to Add Equity in QuickBooks

After account setup, you should know how to add entries for equity in QuickBooks account. You can refer to these following steps:

  • First of all, sign in to the QuickBooks account.
  • You need to choose the “Lists” from the menu
  • Next you need to choose the “Chart of Accounts tab
  • Click on the “Opening Bal Equity” account.
  • Then, select the “Activities” button and click on “Use Register.
  • Now, finally, enter the amount of the equity in the required column.

This interface of QuickBooks is very easy to follow and you are led with the help of prompts as well. In case, you still need help at any time, you can always give us a call, who are renowned experts of this financial accounting platform. Backed with in depth knowledge of our personnel, we can offer you the experts and you can rest assured for all the finance related calculations. At Dancing Numbers, we understand your specific business requirements can vary and we are committed to provide you the best suited resolution for your business.


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