Owner's draws are withdrawals of a sole proprietorship's cash or other assets for the personal use of the owner. Each of the owner's draws of cash will be recorded with a credit to Cash and a debit to the owner's draws account (two examples of account titles include R. Smith, Drawing; N. Ott, Withdrawals). The owner's draws account is a contra owner's capital account or contra owner's equity account because it will likely have a debit balance. The owner's draws account is also a temporary account because its balance will be closed at the end of each year. However, the debit balance is closed directly to the owner's capital account.
The owner's draws are not reported as expenses on the income statement of the sole proprietorship. Rather, the owner's draws are considered to be a direct reduction of the owner's capital and owner's equity.
