Drawing Account

AAA

DEFINITION of 'Drawing Account'

An accounting record maintained to track money withdrawn from a business by its owners. A drawing account is used primarily for businesses that are taxed as sole proprietorships or partnerships. Owner withdrawals from businesses that are taxed as separate entities must generally be accounted for as either compensation or dividends.

INVESTOPEDIA EXPLAINS 'Drawing Account'

A drawing account is helpful to business owners in tracking their businesses separately from their personal finances. It is particularly relevant in partnerships, where partners may wish to monitor withdrawals to ensure that a partner is not taking too much money out of the business. A drawing account is closed to the owners' equity account each year, and is not recorded as a business expense.

RELATED TERMS
  1. Sub Account

    A segregated balance of funds (account) for which the bank acts ...
  2. Account Balance

    1. The amount of money in a financial repository, such as a checking ...
  3. Demand Deposit

    Funds held in an account from which deposited funds can be withdrawn ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to ...
  5. Account

    1. An arrangement by which an organization accepts a customer's ...
  6. Wealth Management

    A high-level professional service that combines financial/investment ...
RELATED FAQS
  1. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  2. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  3. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  4. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  5. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
Related Articles
  1. Retirement

    Discover Master Limited Partnerships

    These unique investments provide significant tax advantages.
  2. Fundamental Analysis

    Looking For Profit In Privately-Held Companies

    Private companies offer unique opportunities for those with the knowledge and resources to take advantage.
  3. Personal Finance

    Protect Your Personal Assets

    A family limited partnership (FLP) can go a long way toward securing your family's property.
  4. Entrepreneurship

    Can You Handle A Home-Based Business?

    Find out if you have the traits to be a top entrepreneur.
  5. Personal Finance

    The Benefits And Pitfalls Of Joint Tenancy

    This arrangement allows beneficiaries to access your account without having to go to court.
  6. Options & Futures

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  7. Economics

    Understanding the Top Line

    Top line refers to a company’s gross sales without any reductions for discounts or returns.
  8. Economics

    What's an Allowance for Doubtful Accounts?

    The allowance for doubtful accounts represents the percentage of the accounts receivable the company expects to write-off as uncollectible.
  9. Fundamental Analysis

    Understanding Activity Ratios

    Activity ratios measure how effectively a business uses its assets.
  10. Investing Basics

    What is Accrued Income?

    In a mutual fund, accrued income is earnings that have accumulated over the year, but have not yet been paid out to shareholders.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!