The Drawing Account
Drawings accounting is used when an owner of a business wants to withdraw cash for private use. In this situation the bookkeeping entries are recorded on the drawings account in the ledger.
If for example an owner takes 200 cash from the business for their own use, then the drawings accounting would be as follows:
Journal Entry for Drawings Accounting
The accounting records will show the following bookkeeping entries for the drawings accounting.
| Account | Debit | Credit |
|---|---|---|
| Drawings Account | 200 | |
| Cash | 200 | |
| Total | 200 | 200 |
Drawings Accounting Bookkeeping Entries Explained
Debit
The withdrawal of cash by the owner for personal use is recorded on a temporary drawings account and reduces the owners equity. It is not an expense of the business.
Credit
Cash is withdrawn from the business and taken by the owner.
The Accounting Equation
The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus equity of the business. This is true at any time and applies to each transaction. The following table shows the Accounting equation for this transaction.
In this case the asset of cash is reduced by the credit entry as the cash is withdrawn from the business. In addition the drawings account has been debited reducing the owners equity is the business. The owner has effectively withdrawn part of their equity as cash.
The drawings account is a temporary account and is cleared at the end of each year either by a debit against the capital account, repayment by the owner or against the salary of the owner, depending on the circumstances of the original cash withdrawal.
Popular Double Entry Bookkeeping Examples
The cash drawings journal entry is one of many bookkeeping journals, discover another double entry bookkeeping example at the links below:
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.