How To Make A Distribution Payment

Task/Problem Overview

Sometimes you need to write a check against an equity ledger for a partner distribution or draw for example. However, when you write a check, you can only pick from expense accounts/ledgers. In order to have the check go against the equity account instead, you need to first write the check against an expense holding account/ledger and then do a journal entry to have it hit the desired equity ledger.

Making a Distribution Payment

• Create an Expense Holding Ledger. If it doesn't exist already, create an expense holding ledger and name it something like "Equity Holding Expense"

  

• Write a check against this holding expense.

  

• Make a Journal Entry to move the exact amount from the Expense Ledger to the desired Equity Ledger.

  

• Verify Accuracy. Verify that the Holding Expense Account is 0. Verify that the bank ledger and the equity account both went down by the exact amount of the check.