JE-15 Jan 2026Manualposted
The owner contributes capital.
| Account | Dimensions | Debit | Credit |
|---|---|---|---|
| 1000 Cash | 25,000 US Dollar | ||
| 3300 Owner's capital | 25,000 US Dollar | ||
| Totals | 25,000 US Dollar | 25,000 US Dollar | |
Balanced.
Journal entry for an owner's draw
For a sole proprietorship or partnership, debit Owner's drawings and credit Cash when the owner takes money out. At year-end, close drawings to capital: debit Owner's capital, credit Owner's drawings. A contribution is the reverse: debit Cash, credit Owner's capital.
- Contribution
- $25,000
- Draw
- $4,000
- Entity
- Illustrative company
- Basis
- Accrual
- Currency
- USD
- Period
- 2026
The worked example
A sole proprietor puts $25,000 into the business bank account in January and draws $4,000 out in June. At year-end the drawings are closed to capital.
Transaction · January 5, 2026
Transaction · June 30, 2026
JE-230 Jun 2026Manualposted
The owner takes a draw.
Journal entry JE-2, 2 lines Account Dimensions Debit Credit 3310 Owner's drawings 4,000 US Dollar 1000 Cash 4,000 US Dollar Totals 4,000 US Dollar 4,000 US Dollar Balanced.
Closing entry · December 31, 2026
JE-331 Dec 2026Manualposted
Close drawings to capital.
Journal entry JE-3, 2 lines Account Dimensions Debit Credit 3300 Owner's capital 4,000 US Dollar 3310 Owner's drawings 4,000 US Dollar Totals 4,000 US Dollar 4,000 US Dollar Balanced.
What the entries do to the accounts
Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.
| Account | Debit | Credit |
|---|---|---|
| 1000 Cash | 21,000 US Dollar | |
| 3300 Owner's capital | 21,000 US Dollar | |
| Totals | 21,000 US Dollar | 21,000 US Dollar |
One account nets to zero across the entries and is not shown.
Why it is booked this way
In an unincorporated business the owner's equity is a single capital account. Money the owner puts in increases it; money the owner takes out reduces it.
Drawings are kept in their own contra-equity account through the year so the total taken out is visible, and closed against capital at year-end.
Common mistakes
- Booking personal withdrawals as business expenses.
- Using a drawings account in a C corporation, where a payment to a founder is wages, a dividend or a loan.
Questions
- Is an owner's draw an expense?
- No. A draw is the owner taking back equity, not a cost of running the business. It reduces equity and never appears on the income statement.
- Can a corporation's founder take a draw?
- A corporation has no drawings account. Money to a shareholder is salary through payroll, a dividend, or a loan to the shareholder that must be documented and repaid.
Terms on this page
Work with this entry
The tool that computes the schedule, the concept behind it, the entries that come next and the components that render them.
- Retained earnings, explained for foundersEvery year's profit or loss since the company started, added up and kept in equity. For most startups it's negative and called an accumulated deficit.Doc
- Temporary account vs permanent accountTemporary accounts — revenue, expenses, dividends and drawings — measure one period and are closed to zero at year-end; permanent accounts — assets, liabilities and equity — carry their balances forward.Compare
- Journal entry for issuing common stockWhen shares are issued for cash, debit Cash for the proceeds, credit Common stock for the par value of the shares, and credit Additional paid-in capital for everything above par.Entry
- Journal entry for dividendsWhen dividends are declared, debit Dividends declared (or Retained earnings) and credit Dividends payable. When paid, debit Dividends payable and credit Cash. At year-end, close Dividends declared to Retained earnings.Entry
- Journal entry for closing entriesAt the end of the fiscal year, debit every revenue account for its credit balance, credit every expense account for its debit balance, and take the difference — net income — to Retained earnings. Revenue and expense accounts start the new year at zero.Entry
- JournalEntryDebit and credit as two columns. No signed-column variant.Component
- BalanceSheetAssets / liabilities / equity, with the balance check.Component
An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the journal entry balancer. General information for US companies under US GAAP, not accounting or tax advice.