QuickBooks Questions – How do I do this and that???

Member since 2018 · 20 posts · 0 votes

Hello – I’m getting started with QuickBooks Pro. Many of my questions I find answered online, but there are some I can’t find answered anywhere. I'd like to open a discussion about some of the questions I have and hopefully the answers would be helpful to others that come across this post.

Current issue I'm dealing with: There are three partners in our LLC. The profits are based upon each of our equity position at time of purchase. That can change per property depending on capital investment and draws by each partner. How do I show each partners equity position at any moment in time?

Also after I have entered a property sale into QB, what is the best way to record each partners profit for the sale?

Any input would be helpful…thank you!

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Linda WeygantPro Member

Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes

@Kelly Cruz - I think what @Caleb Heimsoth is getting at is that setting up multiple properties with different ownership percentages is a nightmare to report all in the same set of books, much less a tax return. You'd have probably been better off showing each property that has different ownership percentages in its own LLC.

I imagine its also a legal nightmare, but I am not a lawyer and all I'll really say is that you should probably check with one.

While it may be pretty easy to track each property and then calculate out owner payouts that way, I guess what I'm wondering is what you're going to do with general business expenses. When you buy a box of paperclips, or a lawnmower to use on all properties or take a vendor out to lunch, how are you going to distribute those kinds of expenses across the various partners? That's probably what Caleb means by a nightmare.

I agree with the others that QuickBooks will not do this calculation for you. Nor should you transfer amounts to Owners Profits accounts more often than at the end of the year. If you're wanting to show owners profits periodically throughout the year, you'll either want different software or you'll want to do it in Excel.

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Dan V.
Real Estate Consultant · Norfolk, VA · Member since 2017 · 345 posts · 201 votes
7y
Originally posted by @Kelly Cruz:
And in addition to the Earnings / Profit equity account for each partner, should there also be an equity account for each partner where I keep track of general expenses. If not, then where do I post expenses for each partner?

Partner 1 Equity
Partner 1 Investments
Partner 1 Draws
Partner 1 Earnings / Profit
Partner 1 Expenses
Partner 2 Equity
Partner 2 Investments
Partner 2 Draws
Partner 2 Earnings / Profit
Partner 2 Expenses
As you can see, I’m a complete QuickBooks novice trying to figure this out as I go…
Here's my approach:
I would just stick with 3 sub-accounts for partner equity account.
- Partner Investments
- Partner Draws
- Partner Share in Profit/Loss (this will be used in allocating income or expenses)
As I have mentioned in my previous post, net income/loss rolls into Retained earnings account but I don't recommend booking an entry against Retained Earnings in QBO (harder to drill down) but instead create another equity account and call it Profit/Loss Distribution then book the entry against that account.
Assume below is your P&L that you will need to allocate.
Sales $100
COGS $60
Gross Profit $40
Expenses $10
Net Income $30
The journal entry to allocate Net income to partners will be:
Debit Profit/Loss Distribution $30
Credit Partner 1 Share in Profit/Loss $10
Credit Partner 2 Share in Profit/Loss $10
Credit Partner 3 Share in Profit/Loss $10
After the entry above your balance sheet will look like this:
Asset $500
Liability $300
Equity
Partners Investment $170
Partners Share in P/L $30
Retained Earnings $30
Profit/Loss Distribution ($30)
Again the above will be my approach to your particular situation. Note that the Retained Earnings should completely offset the Profit/Loss Distribution account once the allocation to partners has been done. As you can see, there are different ways to track and record partners equity, but in your case, I think the more challenging part is figuring out what allocation percentage to use every time you do one. Good luck!
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Gita FaustBusiness Member
Accountant · Richboro - Philadelphia, PA · Member since 2008 · 901 posts · 246 votes
7y
@Dan V.
We do make the retained earnings zero after the tax returns are filed.
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Kelly Cruz
OP
Member since 2018 · 20 posts · 0 votes
7y
Great info @Dan V. Thanks for that explanation!
I'll be working on QB tonight for a couple hours and surely have other questions I run into. If I don't find an answer online, I'll post it here. Thanks again for everybody's helpful advice!
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Kelly Cruz
OP
Member since 2018 · 20 posts · 0 votes
7y
To keep track of partners equity % in each particular property, does this make sense…..on the purchase of a flip property, create a sub-account as shown below? The sub-account will show how much of each owners money was invested.
Partner 1 Equity
- Partner 1 Investments
  - Partner 1 Ownership 321 Main (33.33%)
  - Partner 1 Ownership 711 Beach (45%)
- Partner 1 Draws
- Partner 1 Share of Profit/Loss
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Simon W.Business Member
Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 659 votes
7y
Do you have multiple LLCs or just 1 LLC? It looks like you might be comingling all the expenses into 1 "class" if you are showing on the balance sheet for the different % of ownership.
Accounting Properties LLC
View Page
CFO LLC
View Page
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Kelly Cruz
OP
Member since 2018 · 20 posts · 0 votes
7y
@Simon W. never mind my last post, I'm pretty sure I got that all wrong.
We do have 1 LLC, but different properties may have a different equity split.
ADDITIONAL QUESTIONS:
When flipping, I understand that all expenses for that property are recorded as WIP then moved to COGS on the sale. When entering the final Settlement Statement, should I list all those costs such as escrow fees, property tax, commission, etc to the WIP account? Or should I itemize them to the corresponding COGS/expense accounts? To simplify the accounting, can everything for a property be adding to the WIP account, possibly in different sub-categories – rehab, holding costs, selling costs, etc.? That would seem like the simplest way if itemizing isn't necessary.
Regarding general expenses, I have those labeled as a class. At the end of the year, I run a report and add up the total so that I can split them between equally between the three partners. How do I do that so it reflects on each partners share of profit/loss equity account? Thanks again for any advice!
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Edwin Park
NY · Member since 2019 · 12 posts · 11 votes
7y
Interesting discussion. I'm an accounting newbie myself as well. And it sounds like you're at the point of needing a CPA/Bookkeeper to basically hold your hand and setup everything for you and answer all of your questions. If you can afford it, do it. Just went through that myself recently. Paid an accounting firm via QB's website support section that specialized in QB training at an hourly rate. It was expensive, but worth it.
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