DRAWING ACCOUNT Meaning and
Definition
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A drawing account is a financial account used by business owners or partners to withdraw money from the company for personal use. It represents a record of funds that are taken out of the business by the owner, partner, or shareholder for personal expenses or to cover individual obligations.
In essence, the drawing account functions as a temporary holding account for funds withdrawn by the owner(s) for their personal use. This account is typically set up as an equity account in the company's general ledger. The purpose of the drawing account is to separate personal funds from business funds, allowing for accurate tracking and reporting of business income.
When the owner or partner withdraws money from the business, it is recorded as a debit in the drawing account. This withdrawal decreases the company's equity and reflects a decrease in the owner's or partner's ownership interest as the funds are no longer available for company operations.
The drawing account is separate from other business accounts, such as the cash account or the business owner's capital account, which reflects the original investment made by the owner(s) into the business. The drawing account is closed at the end of each accounting period to the owner's capital account, thereby reestablishing the equity balance. By maintaining a drawing account, business owners can ensure proper financial management and separate business and personal finances for accurate record-keeping and reporting purposes.
Common Misspellings for DRAWING ACCOUNT
- srawing account
- xrawing account
- crawing account
- frawing account
- rrawing account
- erawing account
- deawing account
- ddawing account
- dfawing account
- dtawing account
- d5awing account
- d4awing account
- drzwing account
- drswing account
- drwwing account
- drqwing account
- draqing account
- draaing account
- drasing account
- draeing account
Etymology of DRAWING ACCOUNT
The term "drawing account" can have different meanings depending on the context, so it is important to clarify which specific meaning is being referred to.
In a general sense, the term "drawing account" is derived from the verb "to draw", which means to take money or goods from a specific source. The term was commonly used in accounting to refer to an account that allows partners or shareholders in a business to withdraw funds for personal use. In this case, the funds are drawn from the company's profits or an individual's investment.
In the context of artwork, a "drawing account" can refer to an artist's account or portfolio showcasing their drawings. The etymology in this case is related to the noun "drawing", which comes from the Old English word "drāwing" or "dragan", meaning "to drag" or "to draw out".
