Finance Questions? Ask a Financial Expert for Answers ASAP
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.
If the officer is to pay these back, then it would be correct to keep these as a receivable on the balance sheet.
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
Do you have any further questions about this matter?
If not, please take a moment to rate my response as "Excellent" so that I may receive credit for assisting you today
I don't usually close accounts right away so If I understand this, 1/1/2012 I should create an entry:
officer advances credit $$$$$$
Yes, you would credit officer advances to remove it
and retained earnings debit same.
and then when do I take this as income?
This is not an income item. It's completely balance sheet
Owner advances do not go to the income statement.
oh, ok. I think I got it now.Thanks!