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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I ran a balance sheet with a date of 1/1/2012 on it and it

Customer Question

I ran a balance sheet with a date of 1/1/2012 on it and it already showed officer advances of over $12K when I didn't take any money out. It apparently ran over from the year of 2011.

Was there and entry that I should have made at the end of 2011 to clear this out that I missed or did not do?

Misc.: the balance sheet on 12/31/2011 showed the same exact amount
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

Megan C :

Thank you for your question, and thanks for using JustAnswer.com. At the end of the accounting period, when you close out your income and expense accounts you should also clear out owner draws. The amount of officer withdrawals goes against retained earnings. An entry should have been made to credit the draw account, and debit retained earnings.

Megan C :

If the officer is to pay these back, then it would be correct to keep these as a receivable on the balance sheet.

Megan C :

If these are owner draws, they should have been put in the owner draws account to be recorded in the equity section of the balance sheet. If they are advances that the officer is to pay back, then instead the debit goes to a receivable account

Megan C :

Do you have any further questions about this matter?

Megan C :

If not, please take a moment to rate my response as "Excellent" so that I may receive credit for assisting you today

Customer:

I don't usually close accounts right away so If I understand this, 1/1/2012 I should create an entry:

Megan C :

yes

Customer:

officer advances credit $$$$$$

Megan C :

Yes, you would credit officer advances to remove it

Customer:

and retained earnings debit same.

Customer:

and then when do I take this as income?

Megan C :

This is not an income item. It's completely balance sheet

Megan C :

Owner advances do not go to the income statement.

Customer:

oh, ok. I think I got it now.Thanks!

Megan C and other Finance Specialists are ready to help you
Expert:  Megan C replied 2 years ago.
Thanks Mdl for your positive rating. Please come back and see me any time you have a tax, finance, or social security question that needs answered. It was a pleasure working with you today!