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Drawings ExamplePrevious lesson: Asset Example Next lesson: Income Example d) George Burnham is running short of cash at home. He needs some money to buy his daughter a bicycle for her birthday (i.e. for personal use). He decides to withdraw $500 from the business bank account. What is the impact on the equation for George’s Catering? 
Just as the owner can invest assets in the business (from his personal possessions – called capital), so too can he remove assets from the business for personal use. When the owner removes assets from his business, we call this drawings. This is because the owner withdraws assets. Drawings are the exact opposite of capital. Bank has now decreased by $500. As with the previous example, when an asset decreases, that asset is credited, as it increases on the debit side and decreases on the credit. The owner‘s stake in the assets has also decreased. The owner’s equity increases on the credit side. Therefore, the owner’s equity decreases on the debit side. So what do we do with the owner’s equity? We debit it. The accounting entry is:
This transaction is the exact opposite of example a), where Mr. Burnham put assets into the business. In the entry above we theoretically could have debited capital (this would show that it is decreasing). Drawings, however, is the name used (and the item debited) when assets are taken out by the owner. For every transaction there are two entries. 
It should also be quite apparent that the debits and credits are based wholly on the accounting equation. Previous lesson: Asset Example Next lesson: Income Example Ask Us a Question About This LessonStill scratching your head after going through this lesson? No problem. Send us a question you have relating to this lesson or topic... Return from Drawings Example to Double Entry Accounting Return from Drawings Example to Home Page
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