Owners of small businesses operating as Sole Traders or Sole Proprietors occasionally take money out of the business for personal use. This is typically known as Drawings and should be recorded as such. Please note that if you operate as a Limited Company, then this help document does not apply to you as funds taken out of the business may be recorded as a loan, salary or dividend.
Step 1: Ensure you have a Drawings account
If you have not already done so, create a new account called 'Drawings' in the Chart of Accounts, with an Account Type of Capital and Reserves. Drawings by an owner reduce the equity that the owner has in the business.
There are two options for recording the amount drawn:
Create a new Spend Money transaction from the bank account that you are paying the funds from. In the line item, select the Drawings account created in Step 1 above OR
Create a new Journal transaction, with a debit against the Drawings account, and a credit to the appropriate Bank account.
Once you have completed the above, you can go to your Balance Sheet, and you should see a negative line for the Drawings under the Capital and Reserves section. This indicates that you have reduced your Capital/Retained earnings by the amount withdrawn.