What is the Drawing Account

The owner of a sole proprietorship may form time to time withdraw cash from the business for his personal use. It is customary for the owner to do so if he devotes full time to the business or if the business is his principal source of income. Although such withdrawals reduce capital, they do not represent operating expenses. The usual practice is to record withdrawals in an account bearing the owner’s name followed by Drawing or Personal.

Debits to the drawing account may be considered wither as decreases in capital (negative sense) or as increases in drawings (positive sense). At the end of the accounting period, the balance of the drawing account is reported on the balance sheet as a deduction from capital. Ordinarily the periodic withdrawals of the owner are made in anticipation that the enterprise is operating profitability and that the total amount withdrawn during the period will not exceed the net profit.The Dark Tide