Did You Properly Record Your Owner’s Draw on Your Balance Sheet?

Did You Properly Record Your Owner’s Draw on Your Balance Sheet?

Did You Properly Record Your Owner’s Draw on Your Balance Sheet?

Written by Success-Team

Updated over a week ago

A draw is money taken from a sole proprietorship or partnership for the personal use of the business owner. For example, you might want to pay yourself, or maybe you inadvertently used your business account to pay for a personal expense (try to avoid doing that!) or pay your federal income taxes. 

Draws are not business expenses and do not affect taxable income, but it does reduce the business owner’s equity on the balance sheet. To record a draw:

  1. Create a Transfer for any withdrawal from your business bank account that was a draw.

  2. Add the withdrawal amount to the Owner’s Draw on the balance sheet and match.

  3. If you recorded previous draws improperly this year, make corrections by voiding the erroneous transaction and do them as indicated above. 

Tip: Before recording a transfer to the owner’s draw, verify that the owner’s payment isn't reimbursement for business expenses paid with the owner’s personal funds.

Sunrise and Lendio do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisers before engaging in any transaction.


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