Difference between Cash on Hand and Owner Investment/Drawings?

missingcow

Hi everyone,

I have a quick question about the difference between Cash on Hand and Owner Investment/Drawings. I started working as an independent consultant and very recently started to use Wave to track my billing. I am also very new to accounting. When recording the payment for the invoice, does the payment go under cash on hand or owner investment/drawings?

Thanks so much for your help!

CallieP

Hi there @missingcow , thanks for your post! I'm happy to help out with this. Cash on Hand is an asset account, like your checking account with your bank: it's accessible money which belongs to your business. The only difference between cash on hand and a checking account, is that the checking account is 'digital' money and the cash on hand is physical money. Any money which appears in cash on hand is physical cash, like notes or coins.

Owner's Investment/Drawing is an equity account, which means that it represents the difference between your assets and liabilities and measures the net worth of your business. In other words, equity is what would be left over if you sold all your business assets and paid all your debt.

Since CoH is an asset, and Owner's Draw is equity, these are not equivalent accounts. Learn more here about account types. So, you should record the payment to whichever account best suits where the funds actually landed! (It is likely that your invoices are being paid to an asset account like checking or cash on hand, but you and an accountant can make sure of this together.)