Basic Bookkeeping double entry on dealing with WITHDRAWALS by Owner

January 11th, 2011 Comments off
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Salient points:

(a)    When an owner take goods, cash or other assets out for his private use, this is call DRAWINGS

(b)   ANY drawings from business reduces the owner’s equity in the business

(c)    A temporary account called DRAWINGS Account is open to record all drawings from the owner to ensure proper control and keeps clean the owner’s capital account

(d)   This drawing account ( with DEBIT entries – see below illustration) is eventually transferred to the owner’s capital accounts.

Accounting treatment:

(i)Withdrawal of goods:

Debit  Drawings Account

Credit  Purchases account

(ii)Withdrawal of Cash:

Debit Drawing Account

Credit Cash account

For example:

Proprietor Mr A withdrew  cash $120 and goods worth $500 for personal use

Double entry required:

Dr.  Drawings Account  ($120+$500)   $620

Cr.  Cash Account                                               $120

Cr.  Purchases Account                                      $500

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Financial Accounting

 
 

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