Time for action – entering owner's draw in your books
We are going to look at one example where the owner has decided to have an owner's draw of $10,000.
Make sure you have a Drawing Account. If not, create one. This should be of type Equity and have Equity as the Parent Account.
On the last date of the month, write a check from the business account to your personal account and create an entry in the Drawing Account, as shown in the following screenshot, with the Transfer account being the Checking Account and the amount being $10,000.
What just happened?
One prudent approach to paying the owner is a monthly fixed sum as owner's draw to cover the owner's personal expenses. At the end of the year, depending on how well the business has done and the cash position, the owner can draw an annual bonus. This also helps you to visualize the benefits of running your business. How? If you make a monthly withdrawal that is roughly equivalent to what you can earn as a salaried employee, then you can...
