Chart of Accounts - Sole Proprietor Owner's Draw - Ontario, Canada
DoreenF
Member Posts: 2
I am setting up my Chart of Accounts and would like to know how to account for withdrawing money from the bank account for personal use. I understand this would be an owner's draw. In the second option under the Equity Tab, Retained Earnings: Profit, in the dropdown, is the Account Type, Retained Earnings: Profit, or Business Owner Contribution and Drawing. Which one would I choose? And then presumably, I would rename the account as Owner's Draw?
Thank you.
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Comments
Hey there @DoreenF !
Great question. If you are looking to withdraw money form your business for personal use, you will want to categorize such transaction as "Owner Investment/Drawing". Owner Investment/Drawing is a category used to keep track of the money you pay into and take out of your business.
To further clarify, when you pay for a personal expense from business funds, you'll bookkeep those transactions to owner investment/drawing to indicate that you took money from your business. When you deposit personal funds into your business, this category allows you to keep track of how much you've invested.
Feel free to learn more here: How to record personal transactions from a business account
Great, thank you so much for the information.