So when an owner decides enough is enough and wants out, then what?

The total of that owners equity accounts is what the business owes him. So to get him off the books first you have to roll-up the equity drawing and equity investment accounts into the main equity account.

For the sake of record keeping I would pull three balance sheets ( or four depending) as the work progresses and keep them to show the status of the changes. Pull balance sheet number one before doing anything.

If the owner is taking inventory with him, use inventory adjust and set the adjusting account to the owner equity drawing account. That will move the cost of the inventory out of inventory asset and into his drawing account. (Pull a balance sheet to show this adjustment)

If the owner is taking equipment, you will have to agree on a value (assuming the equipment has not been expensed off the books using the section 179 deduction – if it has there is no value). Once you have that value agreed on, do a general journal entry and move that value from the asset account to his drawing account. (Pull a balance sheet to show this adjustment)

You have to use a general journal entry for equity accounts, since QB didn’t provide any other way to handle equity accounts.

IF … Equity-investment-name has a value
Debit Equity-investment-name for the amount
Credit Equity-name for the same amount

IF … Equity-drawing-name has a value
Debit Equity-name for the value
Credit Equity-drawing-name for the value

Pull a Balance sheet at this time, the owner equity account should have a balance and all the other owner equity accounts for this owner should be zero.

Now write him a check for the amount in equity and as the account use his equity account.

Pull a Balance sheet at this time.

Now you have several balance sheets, the first shows the status of the accounts before you made adjustments, the next few show those adjustments being made, and the last shows the company balances after the owner is off the books.

The only thing not covered here is owner share of current profit. Normally profit is determined at the end of the year and distributed then. This owners share of profits will be determined by how much of the year he was an owner and what you agreed to (in terms of profit share) when he left the business. Determine profits and write him a check for his interest at the end of the year is my advise, but you should talk with your accountant and see how he wants to handle it.

Next year you can mark his equity account inactive, you cannot delete them since there are transactions associated with them.