What is Drawing in Accounting
A drawing refers to the act of the owner(s) withdrawing cash or assets from the company for personal use.
Example of Drawing:
An Owner withdraws the money from the business for their house rent.
A drawing account is a financial record that is kept to document money borrowed from a company by its owners. A drawing account is usually used for companies that are taxed as sole proprietorships or partnerships.
A drawing account functions as a counter-account to the company owner’s equity; any debit to the drawing account is compensated by a credit to the cash account of the same amount.
Drawings accounts are temporary records that may be balanced at the end of a fiscal year or duration. This can be cleared in a variety of cases, with the amount credited to the owner’s equity account and re-established in the New Year.
Is drawing an asset or a liability?
The sum of cash or the value of items drawn from the company by the proprietor for his own use is referred to as drawing. Since the proprietor withdraws from his capital, we cannot declare it a liability or an asset. They are actually deductions that are withdrawn from the capital by debiting the capital account.
Journal Entry of Drawing:
A drawing account journal entry consists of a debit to the drawing account and a credit to the cash account. A journal entry closing a sole proprietorship’s drawing account requires a debit to the owner’s capital account and a credit to the drawing account.
Owner withdraws $5000 from business for personal use.
|(To record owner withdraw cash for personal use)|
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