does the owner of your company constantly take assets from and give assets to your business
well in that case you should watch this video owner's equity and non-cash transactions in
other words the owner brings and takes stuff if you have any questions about this topic you can
leave them in the comment section below and I'll do my best to help you and of course if you feel
the video helped you I hope you will click like and don't forget to subscribe to get updates on
new videos that come out all the time when the business owner takes from or brings to
the business a non-cash asset you must enter it as a journal entry and the good news is
this is the most simple journal entry you will ever record and it's two simple rules that you
have to remember owners capital investment is always credit when the owner gives an asset to
the business an owners withdrawals is always debit when the owner takes from the business
any asset including a non-cash asset very simple to remember even if you never studied accounting
now the assets in both of the two cases are valued differently when giving assets to the business the
money amount recorded is the fair market value of the asset at the moment it is placed into service
for the business however when taking assets from the business the money amount recorded for the
withdrawal is the purchase cost of what we the business paid for that asset in the first place
and once you get that money amount you can very easily make the debit and the credit for example
let's imagine on May 20 VAR da took home a piece of equipment that the company originally paid
$200 to purchase so that means what it means equipment becomes this number well the wait a
minute now let's think about that if we look at the reports and we go to the trial balance we
can see that before this transaction equipment is thirteen thousand five hundred fifteen dollars so
if the owner is taking home two hundred dollars worth of equipment and we learned a moment ago
that when we withdraw assets we record the money amount for the amount that was paid
when we originally purchased it so we're going to lower the equipment by two hundred dollars
and if equipment now is thirteen thousand five hundred fifteen and we lower it by two hundred
dollars it means after we record this take home of equipment equipment will become this number
thirteen thousand three hundred fifty dollars two hundred less and of course the withdrawals
become seven hundred because right now vonda's withdrawals is five hundred dollars but if she
takes two hundred more if she withdraws two hundred more from the business that's two
hundred dollars more in withdrawals and this will become seven hundred dollars let's take a look
at how to record the journal entry we click new transaction go all the way over to other and click
journal entry now we know the date of this journal entry is May twenty of twenty seventeen May twenty
and we know from a moment ago that withdrawals vonda's withdrawals is the account that we will
debit and that's in the equity area vonda's withdrawals because we learned a moment ago
that we debit the withdrawals for the purchase cost of the asset that the owner is taking home
now what is the other account that changes well if vonda is taking equipment then probably equipment
will be a different money amount and QuickBooks knows if withdrawals is debit equipment is credit
and we know that equipment normally has a debit balance and we're decreasing equipment because
we're taking home $200 worth of equipment after we click Save and close you can see
that equipment became exactly the number we predicted thirteen thousand three hundred
fifteen dollars and Vaughn ders withdrawals became seven hundred dollars now let's take
a look at this example let's imagine on May 21 Vonda gave a piece of a gave to the business by
the way a piece of equipment from her home and at the moment she gave this equipment we don't
care what Vonda paid for it when she bought it if she's giving it to the business all we care
about is this FMV the fair market value of the of the equipment exactly on May 21 now if she
gives it to the business equipment will go up well equipment right now is thirteen thousand
three hundred fifteen dollars but if we have three hundred dollars more of equipment it will
become this number 13650 dollars and of course vonda's capital will become one thousand three
hundred dollars because before this transaction vonda's capital is is vonda's capital is right
here which $1,000 so if she invests $300 more worth of assets it will go up by 300 and become
this number that we predict $1,300 very simple we click the plus sign for a new transaction we go
over to journal entry we put may 21 the date of the event now we learned before that capital is
always credit the owners capital vonda's capital always credit at the moment that the owner gives
an asset and we go Boop's we go by the fair market value and keep pushing tab and of course if the
asset that she gave was equipment then equipment should go up and QuickBooks knows if there's a
$300 credit to balance this out equipment should be debit and equipment is normally on the debit
side so by making a debit we will increase it like we're supposed to for $300 click Save and
close and now the trial balance has exactly the numbers we predicted equipment is thirteen
thousand six hundred fifteen dollars looks good and Vaughn does capital is one thousand three
hundred dollars and that's how you record as a journal entry a non-cash owners equity transaction