Drawing Account

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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An accounting record maintained to track money withdrawn from a business by its owners.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.

BREAKING DOWN '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.

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