Journal Entry: Drawings and Withdrawals

Arjun EP

Published on: September 29, 2020

How to make journal entry for drawings and withdrawals

Goods taken for personal use is also known as goods taken for private use, goods taken for domestic use, cash withdrawn for private use.

Amount or money’s worth goods withdrawn by the proprietor for his personal, private or domestic use is known drawings.

The uses of business assets for domestic purposes are also considered as drawings.

For accounting purposes, drawings and withdrawals are different.

Drawings are made out of business income and withdrawals are made out of proprietor’s capital contribution.

Drawings account	Dr	Total of cash or goods taken	Decrease in capital
To Cash account		Cash taken for personal or private use	Decrease in assets
To Bank account		Cash withdrawn from bank for private use	Decrease in assets
To Purchase account		Goods taken for personal use	Decrease in assets
(Being- cash/goods taken for personal, private, domestic use)

Journal Entry

In the book of …………

Date	Particulars		LF	Amount Dr	Amount Cr
	Drawings account	Dr		xxxxx
	To Cash account				xxxxx
	To Bank account				xxxxx
	To Purchase account				xxxxx
	(Being- cash and goods taken for personal use)
31 Dec	Capital account	Dr		xxxxx
	To Drawings account				xxxxx
	(Being: drawings transferred to capital account)

Keep in Mind (KIM)

When a business person or proprietor takes for personal, private or domestic use, it is known drawings.

Cash taken from cash counter for personal, private or domestic use

Withdraws from bank for personal, private or domestic use

Goods taken for personal, private or domestic use

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 12

The following transaction is given by Mr Ajay, proprietor of Unique Electronics:

1 Feb: LED TV taken for domestic use Rs 63,000

10 March: Cash withdrawn for private use Rs 5,000.

15 April: Cash withdrawn from bank for domestic use Rs 35,000.

18 May: Personal insurance premium paid Rs 23,000 from cash counter.

20 June: School fees of children paid by cheque Rs 17,000.

25 Oct: Mixer-grinder worth Rs 5,000 is taken for gift to friend.

31 Dec: Transfer drawing to capital account.

Required: Journal entries

SOLUTION

Journal Entry for American Style

Date		Debit $	Credit $
Feb, 1	Withdrawal account	63,000
	Merchandise account		63,000
	To record LED TVs taken for domestic use

Journal Entry for European Style

Date			€	€
Feb, 1	Withdrawal account	Dr	63,000
	Merchandise account			63,000
	To record LED TVs taken for domestic use

Journal Entries

In the book of Unique Electronics

Date	Particulars		LF	Amount Dr	Amount Cr
1 Feb	Drawings account	Dr		63,000
	To Purchase account				63,000
	(Being- LED TV taken for domestic use)
10 Mar	Drawings account	Dr		5,000
	To Cash account				5,000
	(Being- cash withdrawn for private use)
15 Apr	Drawings account	Dr		35,000
	To Bank account				35,000
	(Being- cash withdrawn from bank for domestic use)
18 May	Drawings account	Dr		23,000
	To Cash account				23,000
	(Being- personal insurance premium paid in cash)
20 Jun	Drawings account	Dr		17,000
	To Bank account				17,000
	(Being- school fees of children paid by cheque)
25 Oct	Drawings account	Dr		5,000
	To Purchase account
	(Being- mixer-grinder is taken for gift to friend)				5,000
31 Dec	Capital account	Dr		148,000
	To Drawings account				148,000
	(Being- drawings transferred to capital account)