Drawings Example: Non-Cash Assets
Q: If an owner withdraws $200 of office supplies for personal use is this a decrease in office supplies AND a decrease in owner's equity?
A: Yes it is.
Anytime any assets are withdrawn from the business for personal use, this is definitely a decrease to those assets in the business and also a decrease to owner's equity.
The name for a decrease in owner's equity due to withdrawing assets is drawings
The most common asset that is withdrawn from a business is cash, but an owner can actually withdraw any asset.
Although this represents a decrease to owner's equity, we use a separate account (not capital
) to record this, called (you guessed it) drawings
The journal entry for this transaction would be:DR Drawings
(decrease in equity) ..............$200
CR Office supplies
As you can see, the debit to decrease owner's equity is made to the account drawings
Hope this drawings example with a non-cash asset makes sense.
Feel free to add your say in the comments below.
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