Is The Drawing Account Increased On The Debit Side Or Credit Side

In a Sole Proprietorship or Partnership, the Drawing Account increased on the debit side as it is the withdrawal of assets by the owners from the business for their own personal uses / private uses. Actually, the drawing account is the reversal of Owners’ Equity Account i.e., it is a Contra Capital Account.

So, the normal or usual balance of drawing account is debit. When the owner withdraws from the business, then it increases on the debit side.

Example: Mr. A is a sole proprietor in his own business. He withdrew Cash of Rs. 6000 from his business for private expenses. What is the journal entry and the effect of this transaction on the accounting equation?

                                                                         Drawings a/c  6000

 

                                                                                                    Cash a/c  6000

 

                                                              (Cash Withdrawan From Business For Personal Use)

The Effect Of The Drawing Account Transaction On The Accounting Equation

                                                         Assets    =     Liabilities     +     Owner’s Equity

                                                         -Cash       =            0             +        (-Drawings)

                                                         -6000       =            0             +           (-6000)

The cash is decreased by Rs. 6000 as it is going out of the business, so we deducted it from assets on the assets side of the accounting equation. Drawings is increasing as the owner (Mr. A) withdrew the cash from business for his own personal expenses, so it affects owner’s equity negatively, so we deducted drawings from owner’s equity on the right side of the accounting equation. At the end, the accounting equation remains in balance.