Drawings Accounts Suggested Handling

[Chris Dennis]

Tax Assistance Program - ( taptax ) wrote:
> Answering Chris’ message:
>> I run a small business and use GnuCash to do the sums.
>> 
>> What's the best way to account for 'Drawings', i.e. the money that I
>> take out of the business?
>  
> 
> I don’t know how a Chartered Accountant would answer your question in 
> the UK.  Let me try to reply from a nuts and bolts perspective.
> 
> Your business is a proprietorship, so most likely you don’t think of 
> yourself as an employee.  Pretend that you are.  The essence of a 
> drawings account in a proprietorship is analogous to a wages account 
> that a business with an employee has.  Your drawings are wages from the 
> perspective of the set of books you keep for your business. 
> 
> Secondly, it seems to me the only way that the drawings account keeps 
> growing is that it is excluded from the closing process that occurs at 
> your year-end, whenever that is.

Today!

 > If you included your drawings account
> in the year-end closing process, I think your problem would be taken 
> care of automatically.  From the perspective of the business, you should 
> treat your drawings as wages so that your reports reflect a more 
> accurate picture of the profits your efforts generate.

Thanks for your reply Tom.

I'm not convinced that drawings are the same as wages, but I'll have to 
think about it some more.

Certainly getting the year-end closures right will solve a lot of problems.

cheers

Chris
-- 
Chris Dennis                                  cgdennis at btinternet.com
Fordingbridge, Hampshire, UK