Glossary
Drawings
Money or goods the owner takes out of the business for personal use.
What it means
Amounts withdrawn by the owner from the business for private purposes, which reduce capital.
Example
If the owner takes RM500 cash for personal use, that is drawings.
Why it matters
Drawings reduce capital and are not an expense, so they never appear in the income statement.
In practice
Drawings never appear in the income statement, because they are not a business expense. In the statement of financial position, the year's total drawings are subtracted from capital alongside profit.
Suppose an owner starts with capital of RM40,000 and earns profit of RM12,000. During the year the owner takes RM7,000 in cash and RM500 of goods for home use. Closing capital is RM40,000 + RM12,000 - RM7,500 = RM44,500. Goods taken are recorded at cost, and they reduce purchases rather than count as sales.
Wages are the easiest thing to confuse with drawings. Money paid to an employee for work done is a running expense in the income statement. Money the owner withdraws is the owner taking back part of their own investment, so it lowers capital and never touches profit. Keeping drawings out of expenses stops profit being understated.
If drawings of goods or cash still catch you out, one of our teachers can show you how to handle them in a full set of accounts. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 5.1 Sole traders (page 15).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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