When an owner decides to withdraw cash from the general company assets, you can account for the withdrawal in two main ways -- using petty cash or an owner's draw account. Typically, you use petty cash for small purchases that cost less than $100. When using petty cash, the best option involves taking the money directly from the petty cash drawer. However, if you already took funds from the business account, you can reimburse the account with petty cash funds. Another possibility involves using an owner's draw account. With an owner's draw account, you can record any withdrawals from the bank account using the separate equity account used to pay the owner.
Select the "Lists" menu and choose "Chart of Accounts."
Click the "Account" button, select "New" and choose the "Bank" radio button to allow your petty cash account to display in your chart of accounts, balance sheet reports and other income and expense accounts. Click "Continue."
Type "Petty Cash" into the Account Name field. Leave the remaining fields blank and don't enter an opening balance. Click "Save & Close."
Select the "Lists" menu and choose "Chart of Accounts" from the list.
Select the "Account" button and click "New."
Select the "Equity" radio button and click "Continue."
Enter "Owner's Draw" for the account name and click "Save & Close."
Select the "Banking" menu and click "Write Checks."
Select the business account used for the withdrawal in the Bank Account drop-down menu.
Type "Cash" in the "Pay to the Order Of" field if you want to use your Petty Cash account. Type the owner's name if you want to record the withdrawal in the Owner's Draw account.
Click the "Account" field drop-down menu in the Expenses tab. Select "Petty Cash" or "Owner's Draw," depending on the method you want to use to track funds.
Enter the total for the withdrawal in the "Amount" column of the Expenses tab.
Click "Save & Close" to save the transaction. If you chose to use your Petty Cash account, you must also record the transaction, otherwise the checking account won't show the actual balance.
Click the "Banking" menu and select "Write Checks."
Choose "Petty Cash" from the Bank Account drop-down list.
Select the "Pay to the Order Of" field and type the owner's name.
Select the "Expenses" tab and click the "Account" drop-down list. Select the business account used to fund the purchase. Enter the total amount in the "Amount" column. Click "Save & Close."
Warning
Information in this article applies to QuickBooks 2013. It may vary slightly or significantly with other versions or products.
