If you’re a business owner you may want to withdraw money or stock for your personal use. This is the equivalent of the owner or partner being paid. To help you keep track of this, you can record owner drawings using journals. Owner drawings don’t apply to limited companies.
To help you record your owner drawings a default drawings nominal ledger account of 3260 already exists. If your company is a partnership, to help you keep track of what they withdraw, you should create a new nominal ledger account for each partner. When you create the account, you need to make sure you choose the Equity category. You can use any code you want, but you may want to keep it in the range of 3000 to 3999 along with your other equity codes.
- 1. Go to Settings, then click Chart of Accounts
- 2. In the Search box, type 3260 then click Search.
- 3. The Drawings – equity account appears on-screen. Click on it to open its details.
- 4. In the Visibility section, select the Other Payment check box.
- 5. Click Save.
- 6. Go to Banking, then click the required bank account.
- 7. Point to New Entry, then click Purchase / Payment.
- 8. Click the Other Payment tab.
- 9. Check or enter the following information:
|Paid from Bank Account||Check the correct bank account appears. If you need to change this, choose the relevant account.|
|Date Paid||Enter the date of the payment.|
|Reference (optional)||Enter a reference for this payment.|
|Amount Paid||Enter the total amount of the payment.|
|Ledger Account||The default Cost of sales – goods ledger account appears. Change this to Drawings – equity (3260).|
|Details||If required you can enter more details about the payment.|
|VAT Rate||If you’re VAT registered, select No VAT for this transaction.|
|Total||This defaults to the value you entered in Amount Paid. You can amend this if required.|
- 10. Click Save.
- 1. Go to Journals, then click New Journal.
- 2. Enter the Reference, Date and, if required, an additional Description.
- 3. Enter the information required to record the drawings, then click Save.
For example, to record money withdrawn, enter the following information:
|*Ledger Account||Details||Debit||Credit||Include on VAT Return?|
|Current (1200)||Owner drawings||0.00||Amount withdrawn||Leave clear|
|Drawings – equity (3260)||Owner drawings||Amount withdrawn||0.00||Leave clear|
To record stock withdrawn, enter the following information:
|Ledger Account *||Details||Debit||Credit||Include on VAT Return?|
|Stock account, for example 1000||Owner drawings||0.00||Value of the stock||Leave clear|
|Drawings – equity (3260)||Owner drawings||Value of the stock||0.00||Leave clear|
If you reclaimed VAT on the purchase of the stock, you also need to include this in the journal. Therefore, post the following journal instead:
|Ledger Account||Details||Debit||Credit||Include on VAT Return?|
|Stock account, for example 1000||Owner drawings||0.00||Net value of the stock||Select this check box|
|VAT on Purchases (2201)||Owner drawings||0.00||VAT amount||Select this check box|
|Drawings – equity (3260)||Owner drawings||Gross value of the stock||0.00||Leave clear|