What is a Drawing Account? Meaning, Features and More.

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In any business, it is very important to manage all the transactions related to the business because without managing the transactions, it becomes very difficult or almost impossible to find out about the status, performance, etc. of the business. One of these transactions is a drawing transaction which shows the transaction done by the business owner from the business for personal use and a drawing account is used to manage this.

Using a drawing account makes it easier to manage the drawing transactions at one place which helps the management in decision-making, planning, etc. and it is managed along with the capital account as both are interrelated. Note: Drawing account is not used in all business forms and the definition of withdrawal made for personal use by the business owner may vary.

What is a Drawing Account?

A drawing account is a type of ledger account that is used to record/manage the withdrawal of assets by a business owner from the business for personal use. In simple words, it is used to manage the withdrawals made by the business owner. In this, the rule of personal account applies because it is a representative account, and due to this, all the withdrawals are written on the debit side and after a particular time it is credited and transferred to the capital account.

Drawing account is mostly used in sole proprietorship, partnership firm, etc. because in these businesses the withdrawal made by the business owner for personal use is called drawing. In this all the transactions are recorded as per the concept of ledger like debit transactions are recorded on the left-hand side which is also called the debit side and credit transactions are recorded on the right-hand side which is also called the credit side.

Features of Drawing Account

Following are the features of a drawing account:

1. Ledger Account:

Drawing account is a ledger account and it comes under representative ledger account under personal ledger account in the classification of ledger accounts. Being a ledger account, the concept of ledger is applicable in it due to which the transactions are recorded in it on the debit and credit side as per the prescribed rules such as transactions are recorded with “To” on the debit side and “By” on the credit side, etc.

2. For Withdrawal:

Drawing account is used to record withdrawals made by the business owner for personal use. This makes it easier to manage all related withdrawals in one place. Note: Salary received by the owner is not recorded in this account as salary is not a withdrawal.

3. Help to Management:

It helps the management in planning, decision-making, tracking transactions, etc. as in it all the withdrawals made by the business owner for personal use are recorded. For example, it can be used to track how many withdrawals have been made during a given period and when and what was done, etc.

4. Not Permanent:

A drawing account is not a permanent account because it is used only when there is a withdrawal and at the end of the financial year all the balances are transferred to the capital account and closed. Every year transactions are recorded in it from the beginning and it is closed at the end of every year. In simple words, it neither has an opening balance nor a closing balance.

5. Not Expense Account:

It is not an expense account because it records the withdrawals and withdrawals are deducted from capital. Any account will be called an expense account only when it is recorded as an expense in the profit and loss account, trading account, manufacturing account, etc.

Read Also:

• What is Drawing? Meaning, Features, and More.
• What is Capital? Meaning, Features and More.
• Rule of Debit and Credit

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