| 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 |